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A more assertive EU in a volatile world – The Security Times

A more assertive EU in a volatile world – The Security Times

The predictions made last year with regard to the growing importance of great power rivalries still rings in our ears.

What is more, our strategic environment grows ever more unpredictable. Today, major powers openly challenge the rules based international order and seek to promote alternative visions of a world divided into spheres of influence. Geopolitical rivalry stokes tensions and raise the alarm bell of a new “proliferation age” that risk escalating into inadvertent military confrontation. Climate change is becoming an existential threat while cyberspace and disinformation campaigns are the new weapons of the 21st century.

For the European Union, the answer is clear: these challenges can only be tackled through a multilateral approach. Together we have the tools and the political weight to shape the future global order if we stay united. This is why instead of retreating from international cooperation and global partnerships, the EU is stepping up its commitment to address global challenges together with its partners: this is true for the Paris agreement on climate change, the Joint Comprehensive Plan of Action (JCPOA) on non-proliferation, the 2030 Agenda for Sustainable Development, the EU’s strategy for connectivity between Asia and Europe or the reform of the WTO.

While these agreements are – in essence – hard to reach, we are convinced they are the best way to ensure a more peaceful, prosperous and secure world environment. Even more so when it is clear that no single country can address these challenges alone. I am convinced this approach is the right one and the fact that demand for European action from our partners has never been so high speaks for itself.

At every given opportunity, the need to define common answers to common problems is not only highlighted but translated into action. The European Union is therefore investing in broader international cooperation and partnerships above all with NATO, the UN, and regional organisations such as the Africa Union and ASEAN. Our trilateral EU-AU-UN cooperation on common challenges such as migration illustrates how multilateral solutions can contribute to greater safety, stability and prosperity.

For instance, as the UN IPCC Special Report on Global Warming warned us recently, there is an urgent need to act on climate change. This is the logic for the EU’s tireless efforts to reach a successful outcome at COP 24 in Katowice. The EU will lead by example by turning its own ambitious commitments for 2030 into concrete action. This was made clear at the high level event on Climate and Security hosted by the EU last June.

In the security sector, the European Union continues to assert its role as a security provider. Not only it is working internally to intensify joint efforts to effectively fight terrorism, hatred and violent extremism, the Union is engaged on the ground with 16 crisis management missions i.e. nearly 4000 men and women. From building capacities in Mali, Niger and Central African Republic, to supporting security sector reform in Iraq, fighting piracy off the coast of Somalia or preventing a resurgence of violence in Georgia, the Union continues to strengthen international security in its neighbourhood and beyond. This is complemented by continued engagement in more than 40 mediation activities across the world, from Colombia to Yemen and Philippines, and underpinned by financial assistance as the EU remains the lead donor for development and humanitarian aid.

As Europe is taking more responsibility for its own security, the debate on European strategic autonomy has moved to the fore and not without controversy. However, at its heart is a simple reasoning: when needed, Europeans need to be able to protect and defend European interests and values and have the capacity to act. We want to be able to cooperate with third countries on our own terms.

In this respect, we stepped up the development of joint military capabilities through our ‘Permanent Structured Cooperation’ (PESCO), we will increase joint investments through the European Defence Fund, we are streamlining military command structures (MPCC), and we agreed a Compact to strengthen our civilian crisis management. As such these initiatives also contribute to strengthen NATO’s European pillar and contribution to collective defence.

Greater responsibility also includes beefing up our own resilience and capacity in energy, space, infrastructure and other critical sectors. We Europeans cannot accept interference and destabilisation through hybrid and cyber-attacks, hence our on-going focus on reinforcing cybersecurity capacities, improving the protection of data and containing disinformation through the recently adopted Action Plan on Disinformation.

We also need to be extra vigilant to preserve achievements on non-proliferation, such as the INF treaty or the nuclear deal with Iran, as the stakes for our own security are simply too high. The starting point cannot be to dismantle the current architecture and start from scratch. We Europeans are working at all levels to promote the universalisation and implementation of existing agreements, such as the Nuclear Non Proliferation Treaty or the Hague Code of Conduct against Ballistic Missile Proliferation.We are also pushing for the Comprehensive Test Ban Treaty to come into force which could play an important role as we work towards a complete, verifiable and irreversible denuclearisation of the DPRK.

Taking greater responsibility does not stop at defence issues. Security today is also about economic security. This notion includes the strategic importance of the Euro and the need to ensure that the single currency can play its full role on the international scene. Promoting the Euro’s international role is part of Europe’s commitment to an open, multilateral and rules-based global economy. The extra-territorial effects of sanctions also challenge the Union’s capacity to follow through on our own political commitments. In this context we are developing mechanisms that will assist, protect and reassure economic actors to pursue legitimate business abroad.

As Europeans we cannot afford to waste time or to be less innovative than others. We need to modernise our approaches and engage more actively with new actors at the intersection of technology and foreign and security policy. This is why the High Representative launched the Global Tech panel, with the CEO of major Tech companies, in order to help ensure that international ethics and rules can keep pace with human ingenuity. To harness these opportunities, we also must take the security implications seriously, hence the recent European Commission Communication on Artificial Intelligence.

All in all, supporting rules based multilateralism and greater European strategic autonomy are not contradictory objectives. If we strengthen our resilience in the face of new risks, the European Union will play its part in reinvigorating the multilateral order and be reckoned as an assertive actor in a volatile world. (This article originally appeared in the newspaper “The Security Times”)


 

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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.