Sanlam’s share price fell by more than 3% after the company released its operational update for the 10 months to end-October.
Net operational earnings and headline earnings per share declined by 6%. Its net result (which takes into account premiums, claim payments and insurance liabilities) from general insurance operations – including its 61% stake in Santam – fell by 50%, amid high levels of damage due to electrical power surges and vehicle theft-related claims, combined with the catastrophic floods in KwaZulu-Natal.
Its net result from life insurance increased by 23%, asset management by 21%, and credit and structuring operations by 17%.
Sanlam says the operating environment remained difficult, as higher inflation and the resulting interest rate increases hit investment markets and the ability of its clients to “commit to new insurance and investment products and retain existing arrangements”.
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Net value of its new life insurance business of R1.8 billion is 14% lower, but margins improved from 2.65% to 2.86%. Its Shiram business in India saw good growth, and new life insurance business volumes from that country rose 22%. Its Malaysian business saw growth of 9%.
The group said that profit from its life insurance business benefitted from lower mortality claims as the impact from Covid-19 faded away.
Sanlam had a busy year of corporate action.
Recently, it announced plans to merge its African operations outside of South Africa with the German financial giant Allianz to create a new, R33-billion company.
Also this year, it bought the Alexforbes life book, while selling the Sanlam standalone retirement fund administration business to Alexforbes.
This month, it completed a transaction with Absa, which saw the bank exchange its investment management business, Absa Investments, for a stake in Sanlam Investment Holdings.
On Wednesday, Sanlam said that work is under way on “integration and realising synergies” in these businesses.
It recently offered to buy a controlling stake in black-owned JSE-listed investment group AfroCentric, which owns medical aid administrator Medscheme.
Its joint venture with MTN, aYo, also launched at the end of October. aYo currently has over 4 million active policies and is operational in four countries (Ivory Coast, Ghana, Uganda and Zambia), with three more currently “operationalising” (Cameroon, Nigeria and South Africa).
The group may yet embark on more corporate action, and on Wednesday confirmed that it is allocating some of its discretionary capital to “value-enhancing opportunities” that will boost growth.
“We are evaluating a number of opportunities in line with our strategy and will continue to allocate capital in a disciplined manner to enhance our long-term growth profile.”
Sanlam’s share price has fallen 13% this year, and is currently trading at around R51.41. Its competitor Old Mutual remained flat on Wednesday.