Sanlam reported a “robust” operating performance for the first six months of 2024, with new life insurance business volumes in South Africa up by 15% on a PVNBP (present value of new business premiums) basis.
New life insurance business volumes increased by 14% to R51.044 billion across the group’s three operating regions: South Africa, Pan-Africa (the SanlamAllianz joint venture and Namibia), and Asia (India and Malaysia). The value of new covered business was up 10% to R1.394bn.
Life insurance net client cash flows increased by 42% to R10.6bn. The higher net inflows were due to stronger performance in South Africa and Asia, which benefited from robust inflows. Pan-Africa benefited from the inclusion of Egypt into the portfolio, along with strong contributions from most regions.
In South Africa, the retail mass segment saw an 11% growth in new life business volumes, with the Capitec business providing strong support to individual life. There has been an improvement in persistency trends since the second quarter of 2024, with fewer policy cancellations and lapses recorded in the individual life business.
The Capitec funeral cover joint venture will be concluded at the end of October. It is expected to result in a reinsurance recapture fee of R1.9bn being paid to Sanlam in November (set to offset a negative book entry of about R1bn).
In the affluent segment, growth in single premiums was driven by improved international sales and continued strong guaranteed annuity sales. Although recurring-premium sales were subdued, Sanlam gained market share in individual underwritten life. Persistency remained stable in the affluent segment.
Corporate single-premium sales benefited from annuities and guaranteed investments.
Sanlam said it expects the implementation of the two-pot retirement system to result in a modest outflow of assets from retirement funds in the short term but for improved asset accumulation in the long term through increased preservation. The group does not expect the new system to have a material impact on its 2024 earnings.
Interim profits
The group’s profit, as measured by “net result from financial services” (NRFFS), grew by 14% to a new high of R7.056bn in the first half of the year. (NRFFS measures profit earned from operating activities and excludes the investment return on the capital portfolio.)
Sanlam said the result reflected strong trading performances across its businesses, the advantages of its scale and market positions, diversification by geography and line of business, and its continued focus on costs and efficiency.
Profit from the group’s life insurance and health operations grew by 14% to R4bn.
General insurance reported a 16% rise in profit to R1.4bn, marked by a robust performance from Santam, where management actions and lower attritional losses offset the impact of adverse weather-related claims.
Read: Santam reports 34% net income growth despite rising weather-related claims
Investment management grew its profit by 10% growth to R531 million. Net client cash flows swung from an outflow of R4.8bn in the prior period to an inflow of R4.1bn for the six-month period.
Profit growth was supported by a strong improvement in the international operations due to improved cost management and a steady performance from the asset management operations in South Africa. The improvement in net client cash flows emanated from strong inflows in South Africa wealth management, and the international and the Pan-Africa operations.
Contributions from acquisitions
Sanlam said key acquisitions, including BrightRock, Capital Legacy, Absa, and Alexforbes, contributed positively to the group’s performance. The exception was healthcare business Afrocentric, in which Sanlam increased its stake from 28% to 59.8% in May 2023.
Capital Legacy’s product range has been actively sold into the Sanlam client base and these products have been well received by the Sanlam distribution. This business contributed 4% to group value of new business. The Absa and Alexforbes retail investment platform businesses, both acquired in 2023, have contributed 5% to the group’s new business volumes.
The final step in the integration of the Absa asset management business into Sanlam’s investment operations took place with the merger of the Absa Fund Managers platform into the Sanlam Collective Investments platform in March 2024.
Sanlam attributed in the underperformance by Afrocentric to challenging trading conditions and margin pressure from increased competition and lower pricing in the pharmaceuticals business, as well as higher investment required in the administration business. As a result of this underperformance, Sanlam impaired Afrocentric’s equity value by R910m.
Sanlam said it remains confident that Afrocentric will add to the Sanlam group in the long run, particularly through its contribution to “our holistic and integrated product offering”.
In its Pan-Africa operations, Sanlam said the SanlamAllianz joint venture integration is progressing well, and the focus remains on achieving operational synergies.
It was positive about the growth prospects for the African countries in which it operates, despite the challenges of high interest rates and inflation in many countries, as well as continued pressure on currency exchange rates.
In April 2024, Sanlam announced its plan to increase its effective economic shareholding in Shriram Life Insurance and Shriram General Insurance to more than 50%, further solidifying its presence in the growing Indian insurance market. The transaction, currently pending regulatory approval, will strengthen Sanlam’s exposure to India’s insurance sector, which the group believes holds immense growth potential.
In June 2024, Sanlam unveiled its intent to acquire a 60% stake in MultiChoice’s insurance business. This move promises significant cross-selling opportunities, leveraging MultiChoice’s extensive client base across Africa. The transaction, valued at R1.2bn upfront with potential growth-based earn-outs, is expected to close in late 2024, subject to regulatory approval.
