Sanlam Ltd S/Adr

Ladies and gentlemen, and welcome to the Sunlum 2026 three-month operational update. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the call. If you should need assistance during the call, please signal an operator by pressing star, then zero. Please note that this event is being recorded. I will now hand the conference over to Paul Hanratty. Please go ahead, sir.

Irene, thank you very much, and good afternoon, ladies and gentlemen, and thank you very much for joining us on this call today. I am joined on the call today by our Group Finance Director, Abigail Makuba, our Group Chief Risk Officer and Chief Factory, Milonga Lodzi Mashlangeni, and our Head of Investor Relations, Tikela Milodzi. Earlier today, we released our operational update for the first three months of 2016. I'll provide a very brief overview of our strategic progress and operational performance before we'll open the line for questions. The group is investing in organic growth, and while this puts some short-term pressure on earnings, it underpins future growth. Against this backdrop, I'm going to cover five points briefly, in order, I hope, to assist you in making some sense of the quarter's performance. First off, the group continued to make excellent progress in the execution of strategic priorities in the quarter. We closed the 91 transaction in early February. The MUFG, Capital Injection Industry and Finance, took place just after the quarter end, and we now have more than 50% share in each of the Indian insurance businesses and their economics. We have capacitated the Lloyd Syndicate, Our cloud migration is on track and we're progressing to launch banking services in South Africa just as soon as we've obtained the necessary regulatory approvals. We're confident that our current platform coupled with the growth sectors we're investing in will drive future growth for the group. Second point to make at this time is that the group's capital position remains very strong. Discretionary capital is now around the upper end of our long-term target range following the closure of the Indian insurance transactions. And this stands us in good stead to deal with any volatility that might arise in the balance of the year. Turning to earnings, which is the third area I want to talk a little bit about. In our business, of course, one quarter is no real guide to the full year. And this first quarter saw volatility in both investment variances from ALM hedging and large reductions in underwriting profit with both Suntum and Saint-Lamaliens as a result of large weather-related claims. Importantly, Saint-Thomas still achieved an underwriting margin above the midpoint of their target range despite those adverse weather claims, while Saint-Lamaliens fell below this range. The weather losses in the first quarter were large compared to the prior year, but within the normal range of what we expect in any given period for this sort of event. In judging earnings progress from prior year, one needs to adjust the South African Rand strength, save of the asset management business to 91. These dividends and capital movements will not appear in Sunland's operating profits, and for the restructuring of the group to upweight India while down weighting Sunland Allianz from a profitability point of view. Investment variances included in operating profit were positive for the quarter. For the purposes of determining cash earnings from which we can declare dividends, these investment variances are transferred to the asset mismatch reserve for release to profits in later years, exactly as in the past. The 91 transaction creates different effects across operating profit, headline earnings, and GEV. So quarter-on-quarter comparisons require some particularly special care. Importantly, the transaction strengthens both our strategic position and future dividend check capacity. The investment returns on shareholder funds were lower in the first quarter than in the first quarter of the previous year. Higher bond yields and some stock markets, Morocco in particular, drove lower returns on those assets. As a result, return on equity was a little depressed in the first quarter. The fourth area that I want to focus on is new business volumes and their client cash flows. We're delighted to see overall strong growth in new business volumes and their client cash flows. Overall sales were strong, with particular emphasis on capital-like market-linked sales, with only Sanlam Alian's general insurance and the Indian life sales disappointing. The lower V&V margin primarily reflects product mix rather than a deterioration in underlying economics. And consistent with these bumper sales was good persistency experience. Finally, I'd like to mention a few points regarding the outlook for the balance of the year. Despite the current global volatility, we are optimistic both about the long-term growth prospects for the group and the current year performance. Our clients have weathered the storm so far, And while higher oil prices and inflation will create cost of living pressures in the short term, the group remains well positioned for long-term growth. The weather-related claims in the first quarter are not out of line with our expectations of potential volatility from the source. Parts of the Western Cape have suffered severe storm damage over the last few weeks, i.e. after the quarter end. The extent of the damage has not yet been quantified yet, and we do expect it to have an impact on the results of the year progresses. We have, however, taken a number of actions to prioritise restoring both the B margins and to compensate for the higher claims experienced from weather events in the first quarter. This is across the group. Some of these efficiency initiatives will only be fully realised by the end of the year, so we expect to have second-half earnings higher than first-half earnings, always subject, of course, to weather, global geopolitical environment, and, of course, the normal economic factors and market levels that we are susceptible to. We do, however, see some progress on earnings growth by the end of the first half. In conclusion, the first quarter of 2016 has seen some considerable strategic progress, and we remain confident about meeting the long-term targets we set. for the business over time. There are quite a few moving parts affecting the first quarter's operating profit, but the group remains confident that through its actions it will be able to meet the full year guidance, subject of course to those same unknowns of weather, the geophysical environment and of course various market levels. I hope that those few comments helped us to give you a little bit of insight boundaries around and some guidance on how we saw the first quarter. I will now open up to questions and Abigail, Melinda, Lozi are standing by to help answer your questions. So thank you very much.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star and then one on your touch-tone phone or on the keypad on your screen. You will hear a confirmation saying that you have joined the queue. If you decide to withdraw the question, please press star and then 2 to remove yourself from the queue. Once again, if you would like to ask a question, you may press star and then 1. The first question we have is from Michael Priscilla of UBS. Please go ahead.