Sanlam : Operational Update – June 2018

6 June 2018

Operating conditions remained challenging during the first four months of 2018 across a number of markets where Sanlam operates. Despite these conditions, the Group's well-diversified profile enabled us to deliver a satisfactory operational performance for the four months ended 30 April 2018.

Economic growth in many markets remains below longer-term potential, in particular in our large South African and Namibian markets where only modest growth is expected for 2018. In South Africa, business and consumer sentiment improved following the political changes in December and early 2018. As anticipated, it will take some time for the improved confidence to transpire into accelerated economic growth. Economic conditions in Namibia continue to be impacted by liquidity constraints emanating from its twin deficit, while the economies and currencies of Nigeria and Angola remained under pressure. The economic outlook in the other Africa regions where the Group operates is slowly improving, while conditions in India and Malaysia remain robust.

The first four months of 2018 were also characterised by significant volatility in South African and international investment markets. Global stock markets reached record-levels during 2017. The South African market also rallied into December 2017, finding support from the global market performance as well as the favourable outcome of the ruling party's elective conference. Optimism improved further with the appointment of Cyril Ramaphosa as South African president and the subsequent cabinet changes. Indications were that the South African market would continue its rally following these developments, but this was short lived as global markets were halted by fears of an accelerated interest rate hiking cycle by the US Federal Reserve and heightened global geopolitical risk. This spurred a global stock market sell-off and resulted in a decline across investment markets at the end of Q1 2018. The South African equity market recovered somewhat during April 2018, but still recorded negative returns for the first four months of 2018 compared to positive returns in the comparable period, impacting negatively on the investment return earned on the Group's capital portfolio on a relative basis. South African interest rate markets also reacted positively to the political developments, with long term rates declining since 31 December 2017.

The sharp strengthening of the Rand exchange rate in 2017 and 2018 is reflecting in a stronger average exchange rate in 2018 relative to the first four months of 2017, suppressing the overall translated results of Sanlam Emerging Markets as well as Sanlam Investments' international operations.

The acquisition of the remaining interest in Saham Finances is progressing according to plan. The first phase of funding for the transaction was concluded at the end of March 2018 through an accelerated book build equity issuance. An additional 5% equity raising is planned, with the intention to utilise it as an opportunity to further strengthen the Group's empowerment credentials (refer Capital section below).