SEM helps Sanlam’s new business volumes to grow 16%

Sanlam raised its new business volumes by 16% to R210.84 billion for the year to December partly as a result of its Sanlam Emerging Markets strategy.

Johannesburg - Sanlam raised its new business volumes by 16 percent to R210.84 billion for the year to December partly as a result of its Sanlam Emerging Markets (SEM) strategy, which includes India, Malaysia and Zambia, South Africa’s largest insurer said yesterday.

The group said its full-year profit rose 2.3 percent after the value of new life business slumped and growth in its home market slowed.

Sanlam chief executive Ian Kirk said while the SEM contributed to the rise in its business volumes, it also added to a 4 percent decline in its net result from financial services in 2015.

“Taking these challenges into account, a key priority for 2016 will be to ensure SEM operations have the appropriate capacity and level of support,” Kirk said.

Sanlam’s shares slid 5.19 percent on the JSE yesterday after the company released less-than-pleasing results to close at R59.32.

The group also reported diluted headline earnings a share of 459.5c, a 12 percent rise from the previous recording period.

The reporting period was dominated by a slowdown in the economy, a weak rand and a fall in commodity prices, which also affected Sanlam’s life insurance business.

Possible downgrade

Kirk said business in South Africa was worried about the continued talk about a possible downgrade to junk status by rating agencies such as Moody’s.

“A downgrade to junk status would have a negative impact on business and the economy of the country,” he said. “We are, however, satisfied that government, business and other stakeholders are working together to address the challenges facing our country’s economy including the downgrade risk. It is, however, important to note that due to the fact that a credit downgrade is anticipated in some quarters, the market may already be discounted to a degree.”

The company recorded a 2.26 percent in net profit from R8.74bn R8.94bn for the year.

Kirk described 2015 as one of the toughest years for business in and outside South Africa since the financial crisis in 2008.

“However, our solid strategy and diversification across geographies, market segments and product solutions again provided the resilience that enabled us to withstand these conditions and deliver a satisfactory performance,” Kirk said.

The net result from financial services increased by 6 percent to R7.3bn. The group has been expanding in Africa and Asia to help boost profit as the South African economy slows.

The group said it had put aside R2.3bn in unallocated discretionary capital for further expansion and diversification, adding that there were challenges that lay ahead like growth remaining below the longer-term potential in most markets, particularly South Africa.

Kirk said the implementation of regulatory changes in South Africa and the UK would continue to be a challenge and investment market volatility would probably persist.

New business numbers

“We have a solid strategy and implementation capability and we will focus hard on meeting the challenges,” Kirk said.

Normalised headline earnings were R8.94bn, up by 6 percent from R8.74bn reported in 2014.

Brad Preston, the chief investment officer at Mergence Investment Management, said: “Given that Santam had already reported very strong numbers, the Sanlam numbers today were a little bit disappointing with the main negative a R92 million loss in Sanlam capital markets driven by their corporate bond exposure. Much of the other weakness was already flagged in the first-half interim results (the impairments in India, etc).”

Preston said the group might be in a position to reap benefits in the future because of the growth in new business numbers.

“The new business growth numbers were actually quite good across most businesses, which bodes well for future earnings,” he said.

BUSINESS REPORT