Sanlam’s life insurance operations experienced what the group called “a strong recovery” in the first six months of its 2022 financial year as a result lower mortality claims compared to the same period in 2021.
Sanlam, Africa’s biggest non-bank financial services group, released its interim results to 30 June last week.
Chief executive Paul Hanratty said the “Covid-19 impacts have begun to recede, and the structure of the group’s assets is such that we are likely to perform extremely well in an era of high inflation and interest rates. Although these will have negative impacts in the short term, consumers are likely to review their cover upwards as inflationary wage increases come through over time.”
The decline in death claims resulted in net client cash flows from life insurance operations increasing by 65%, to R13.762 billion.
The group’s earnings from life insurance grew by 23% (to R2.736bn), while earnings from investment management (R472 million), and credit and structuring operations (R754m) increased by 25% and 22%, respectively.
Its net operational earnings were down 7%, to R4.353bn, mainly due to a 94% decline in investment returns on shareholders’ portfolios, higher expenses on new projects, and a 57% decline in earnings from general insurance operations.
Sanlam’s life insurance business consists of Sanlam Life and Savings (SLS), Sanlam Emerging Markets and Sanlam Investment Group.
Lower mortality claims resulted in a 34% increase in profits from SLS’s three business units: Retail Mass, Retail Affluent and Corporate.
Retail Mass benefited from lower mortality claims in the individual, group and Capitec Bank funeral businesses. This offset lower investment income and higher lapse rates as lower-income consumers, in particular, come under pressure from surging inflation.
Retail Affluent recorded an increase in income from fees due to higher average assets under management.
Corporate, which was most impacted by excess mortality claims in 2021, recorded a strong rebound in earnings, from a loss of R558m to a profit of R260m.
Muted new business volumes
However, Sanlam’s life insurance operations were not entirely immune to the difficult macro-economic environment.
The interim results show that life insurance new business volumes declined by 7% (or 1% if the UK-based operations it sold are excluded) to R33.231bn.
Sanlam said the lower volumes were largely because of a decline in the sales of guaranteed annuities and international products by Retail Affluent. However, these sales were still higher than pre-pandemic levels. Retail Affluent’s sales of recurring premium investment products rose by 2%.
Retail Mass saw growth of 27% in its individual life business, while Capitec Bank funeral sales increased by 17%.
Corporate’s new business volumes increased by 14% because of good sales of single premium investment products (up 16%). Recurring premium volumes were 23% lower as the market rates for group risk business “softened” in the first half of the year.
