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Overview for the week and 5-day outlook to Wednesday 10 December 2017

Overview for the week and 5-day outlook to Wednesday 10 December 2017

Visual: Magnetosphere strength as measured three-hourly

Source: Weather Prediction Centre of the US government’s National Oceanic and Atmospheric Agency. https://services.swpc.noaa.gov/images/planetary-k-index.gif

What Happened

Over the last twenty years, the pivotal role of the sun in earth’s climate has developed into an independent scientific discipline, popularly referred to as “space weather.”

The sun is much more than just a source of visible, light energy. The coronal holes that regularly develop on its surface send out streams of electromagnetic energy which scientists now realise, has a major impact on weather and on the stability of the earth’s crust.

Similarly, so-called sunspots, areas of strong polarity on the sun’s surface, eject massive amounts of magnetic energy which tend to interfere with satellites, and disrupt anything electric or electronic on earth. Coronal mass ejections are often the culprit behind the breakdown of electricity distribution networks, and navigation systems used for flight control.

The earth itself is one huge magnet as testified by its polarity and the north south orientation of its energy field. But it has only fairly recently been realised that the sun’s magnetic force has a very substantial impact on the earth’s magnetic shield.

This so-called magnetosphere protects the earth from the sun’s harmful radioactive energy, blanketing the high energy particles that follows in the stream of any solar ejection. So when the sun’s activity is low, the magnetosphere is also low. It is a reciprocal relationship in which the sun is the dominant player.

Although there is very little agreement in the scientific community, it is suspected that low sun activity leads to extreme conditions on earth, and temperature is just one of the variables.

A while back, Australia suffered extreme heatwave conditions. For the past four weeks it was southern Africa’s turn although the past week was slightly milder than the previous three.

This is usually explained by the thickness of the atmosphere through a process called diabatic compression. But because of the endurance of heatwaves over the past few years, it is now believed that the thickness of the atmosphere is only one element that causes extravagant heat. The other is the sun, but not when its activity is elevated. Temperature extremes are linked to weak sun activity as is currently the case, and the strength of the earth’s magnetosphere is a convenient proxy to determine the level of sun activity.

It is obvious that in summer temperatures must be higher. This is axiomatic because the sunshine hours per day are more, but in summer there are other weather factors such as particle density, moisture, cloud formation, and wind strength that moderate local temperatures through their combined effect.

Nevertheless, southern Africa has been experiencing a blisteringly hot early summer, not easily explained only by the thickness of the atmosphere, and the accompanying visual shows just how calm the magnetosphere is. This is the result of unprecedented low sun activity and has been the case for more than a month.

This week, local weather was a continuation of the previous week’s conditions with little change in the overall picture. The South Atlantic high remained offshore with only a limited inland effect, and then restricted to the sub-continent south of the Orange River.

This was also the second week that the South Atlantic high was weaker than the southern Indian high and that lower pressures were present across almost the entire sub-continent.

The only exception was the strong system that crossed the Western Cape on Thursday and Friday, indicating just how much the southern half of the region’s weather is still controlled by a weather pattern that is essentially a winter pattern.

What’s Coming

The outer rim of the South Atlantic high has a brief impact on Saturday and Sunday, leading to somewhat cooler nights up to about Grootfontein but the days will still be very hot.

There is an area of significantly lower pressure over northern Botswana, Namibia’s Zambezi region, southern Angola and Western Zambia.

This lower pressure area also has a thicker atmosphere hence the afternoons in Namibia’s north-eastern quadrant will be blistering.

Airflow over the western half of the country will be predominantly south-west, and northerly to north-westerly over the eastern half.

No rain is expected over the weekend except for Kavango East, Bwabwata and Zambezi. The interior may at times be very windy, especially at night.

For next week, rainfall prospects remain bleak for the entire country, even for the Caprivi. Heatwave conditions return with a vengeance on Monday and will continue through Wednesday.


 

About The Author

Sanlam 2018 Annual Results

7 March 2019

 

Sanlam’s 2018 annual results provides testimony to its resilience amid challenging operating conditions and negative investment markets

Sanlam today announced its operational results for the 12 months ended 31 December 2018. The Group made significant progress in strategic execution during 2018. This included the acquisition of the remaining 53% stake in SAHAM Finances, the largest transaction concluded in the Group’s 100-year history, and the approval by Sanlam shareholders of a package of Broad-based Black Economic Empowerment (B-BBEE) transactions that will position the Group well for accelerated growth in its South African home market.

Operational results for 2018 included 14% growth in the value of new life insurance business (VNB) on a consistent economic basis and more than R2 billion in positive experience variances, testimony to Sanlam’s resilience in difficult times.

The Group relies on its federal operating model and diversified profile in dealing with the challenging operating environment, negative investment markets and volatile currencies. Management continues to focus on growing existing operations and extracting value from recent corporate transactions to drive enhanced future growth.

The negative investment market returns and higher interest rates in a number of markets where the Group operates had a negative impact on growth in operating earnings and some other key performance indicators. This was aggravated by weak economic growth in South Africa and Namibia and internal currency devaluations in Angola, Nigeria and Zimbabwe.

Substantial growth in Santam’s operating earnings (net result from financial services) and satisfactory growth by Sanlam Emerging Markets (SEM) and Sanlam Corporate offset softer contributions from Sanlam Personal Finance (SPF) and Sanlam Investment Group (SIG).

Key features of the 2018 annual results include:

Net result from financial services increased by 4% compared to the same period in 2017;

Net value of new covered business up 8% to R2 billion (up 14% on a consistent economic basis);

Net fund inflows of R42 billion compared to R37 billion in 2017;

Adjusted Return on Group Equity Value per share of 19.4% exceeded the target of 13.0%; and

Dividend per share of 312 cents, up 8%.

Sanlam Group Chief Executive Officer, Mr Ian Kirk said: “We are satisfied with our performance in a challenging operating environment. We will continue to focus on managing operations prudently and diligently executing on our strategy to deliver sustainable value to all our stakeholders. The integration of SAHAM Finances is progressing well. In addition, Sanlam shareholders approved the package of B-BBEE transactions, including an equity raising, at the extraordinary general meeting held on 12 December 2018. Our plan to implement these transactions this year remains on track.”

Sanlam Personal Finance (SPF) net result from financial services declined by 5%, largely due to the impact of new growth initiatives and dampened market conditions. Excluding the new initiatives, SPF’s contribution was 1% down on 2017 due to the major impact that the weak equity market performance in South Africa had on fund-based fee income.

SPF’s new business sales increased by 4%, an overall satisfactory result under challenging conditions. Sanlam Sky’s new business increased by an exceptional 71%. Strong growth of 13% in the traditional individual life channel was augmented by the Capitec Bank credit life new business recognised in the first half of 2018, and strong demand for the new Capitec Bank funeral product. The Recurring premium and Strategic Business Development business units also achieved strong growth of 20%, supported by the acquisition of BrightRock in 2017. Glacier new business grew marginally by 1%. Primary sales onto the Linked Investment Service Provider (LISP) platform improved by 5%, an acceptable result given the pressure on investor confidence in the mass affluent market. This was however, offset by lower sales of wrap funds and traditional life products.

The strong growth in new business volumes at Sanlam Sky had a major positive effect on SPF’s VNB growth, which increased by 7% (14% on a comparable basis).

Sanlam Emerging Markets (SEM) grew its net result from financial services by 14%. Excluding the impact of corporate activity, earnings were marginally up on 2017 (up 8% excluding the increased new business strain).

New business volumes at SEM increased by 20%. Namibia performed well, increasing new business volumes by 22% despite weak economic conditions. Both life and investment new business grew strongly. Botswana underperformed with the main detractor from new business growth being the investment line of business, which declined by 24%. This line of business is historically more volatile in nature.

The new business growth in the Rest of Africa portfolio was 68% largely due to corporate activity relating to SAHAM Finances, with the East Africa portfolio underperforming.

The Indian insurance businesses continued to perform well, achieving double-digit growth in both life and general insurance in local currency. The Malaysian businesses are finding some traction after a period of underperformance, increasing their overall new business contribution by 3%. New business production is not yet meeting expectations, but the mix of business improved at both businesses.

SEM’s VNB declined by 3% (up 6% on a consistent economic basis and excluding corporate activity). The relatively low growth on a comparable basis is largely attributable to the new business underperformance in East Africa.

Sanlam Investment Group’s (SIG) overall net result from financial services declined by 6%, attributable to lower performance fees at the third party asset manager in South Africa, administration costs incurred for system upgrades in the wealth management business and lower earnings from equity-backed financing transactions at Sanlam Specialised Finance. The other businesses did well to grow earnings, despite the pressure on funds under management due to lower investment markets.

New business volumes declined by 13% mainly due to market volatility and low investor confidence in South Africa. Institutional new inflows remained weak for the full year, while retail inflows also slowed down significantly after a more positive start to the year. The international businesses, UK, attracted strong new inflows (up 57%).

Sanlam Corporate’s net result from financial services increased by 4%, with the muted growth caused by a continuation of high group risk claims experience. Mortality and disability claims experience weakened further in the second half of the year, which is likely to require more rerating of premiums in 2019. The administration units turned profitable in 2018, a major achievement. The healthcare businesses reported satisfactory double-digit growth in earnings, while the Absa Consultants and Actuaries business made a pleasing contribution of R39 million.

New business volumes in life insurance more than doubled, reflecting an exceptional performance. Single premiums grew by 109%, while recurring premiums increased by a particularly satisfactory 56%.

The good growth in recurring and single premium business, combined with modelling improvements, supported a 64% (71% on a comparable economic basis) increase in the cluster’s VNB contribution.

Following a year of major catastrophe events in 2017, Santam experienced a relatively benign claims environment in 2018. Combined with acceptable growth in net earned premiums, it contributed to a 37% increase in gross result from financial services (41% after tax and non-controlling interest). The conventional insurance book achieved an underwriting margin of 9% in 2018 (6% in 2017).

As at 31 December 2018, discretionary capital amounted to a negative R3.7 billion before allowance for the planned B-BBEE share issuance. A number of capital management actions during 2018 affected the balance of available discretionary capital, including the US$1 billion (R13 billion) SAHAM Finances transaction. Cash proceeds from the B-BBEE share issuance will restore the discretionary capital portfolio to between R1 billion and R1.5 billion depending on the final issue price within the R74 to R86 price range approved by shareholders.

Looking forward, the Group said economic growth in South Africa would likely remain weak in the short to medium term future, and would continue to impact efforts to accelerate organic growth. The outlook for economic growth in other regions where the Group operates is more promising. Recent acquisitions such as the SAHAM transaction should also support operational performance going forward.

“We remain focused on executing our strategy. We are confident that we have the calibre of management and staff to prudently navigate the anticipated challenges going forward,” Mr Kirk concluded.

Details of the results for the 12 months ended 31 December 2018 are available at www.sanlam.com.