Sanlam achieves solid 4-month results to 30 April
Cape Town - Sanlam today reported solid results in the four months to 30 April despite challenging investment market conditions caused by the global impact of the Coronavirus.
The Group had a solid start to the 2020 financial year as communicated to shareholders in the Covid-19 update released on the JSE News Service in March this year. However, the operating environment deteriorated substantially from the end of February as governments around the world implemented strict measures to control the spread of Covid-19. These included the declaration of states of disaster and emergency in several countries where Sanlam operates, as well as severe limitations on people movement and preventing face-to-face sales in most operations. These were in line with similar measures implemented globally. Global growth estimates were revised down sharply, driving significant volatility in investment markets across the world.
The Group’s new business volumes across the board were up on the previous period. However, they were significantly impacted since the last week of March. This was as a result of restrictions on intermediary activity imposed under Covid-19 lockdown regulations. Investment in digital businesses such as MiWay and Sanlam Indie, as well as digital sales tools for Sanlam advisors, alleviated the pressure to some extent. The available digital sales tools are, however, targeted at the middle-income and affluent market segments. The Sanlam Sky intermediated distribution channel and many other emerging markets channels are still predominantly based on personal interaction, with a commensurately more pronounced negative impact on new business sales in these areas. The new business slowdown will impact new business volumes for the financial year.
Despite these challenges, Sanlam achieved solid operational results and responded rapidly to the lockdown measures in South Africa, its largest market, from 27 March 2020 as well as the lockdowns and curfews implemented in the Group’s other markets. Close to 90% of the office staff were enabled to work from home. The Group is carefully managing the employees’ return to work in line with the amendments to lockdown levels, with the health and safety of staff being the priority.
Sanlam Group Chief Executive Officer, Mr Ian Kirk, said: “We are pleased with our results for the four months to 30 April 2020 in the context of the operating environment we faced. This bears testimony to the resilience of our diversified operations and the skills and exemplary dedication of our employees under challenging conditions.”
Net result from financial services declined by 21% on the first four months of the 2019 financial year. Excluding the negative impact of investment market volatility caused by Covid-19, net result from financial services increased by a pleasing 13%.
- Sanlam Personal Finance’s net result from financial services declined by 13%, largely attributable to lower income from life investment products in Glacier where the business shares in the actual return earned on the underlying portfolios, which were depressed by the negative investment market performance in the first four months of the year. Excluding this, net result from financial services increased by 5%.
- Risk profits in the Recurring Premium business increased strongly, supported by growth in the size of the book as well as continued positive claims experience. No Covid-19 mortality claims have been received up to the end of April 2020.
- The Glacier LISP platform performed well, with the decline in investment markets more than offset by strong net fund inflows.
- Sanlam Sky experienced a decline in net result from financial services, attributable to Covid-19 support to advisers, higher new business strain and negative expense assumption changes.
- The decline in equity markets in North West Africa adversely affected investment return earned on Sanlam Emerging Markets’ general insurance funds in Africa due to the approximately 40% and 30% respective exposures to equities and properties in the portfolio. The net result from financial services declined by 27% as a result. Excluding the general insurance float returns in Africa, net result from financial services increased by 29%. The Other International region achieved overall strong growth with major businesses contributing to the performance, including continued strong profit growth from Shriram General Insurance in India.
- Sanlam Investment Group’s contribution to net result from financial services decreased by 134% (up 19% excluding the impact of investment market volatility on SanFin). The asset management and wealth management businesses achieved sterling growth of 20% despite the pressure on assets under management. Earnings benefited from increased performance fees, strong net fund inflows at Sanlam Multi-Manager and Satrix towards the end of 2019 and the start of 2020. SanFin experienced a decline in net result from financial services from R82 million in 2019 to a loss of R350 million in 2020, due to widening credit spreads and marked-to-marked losses on listed preference shares, as well as additional credit-related provisions of R175 million after-tax as credit risk rose in the wake of deteriorating economic conditions.
- Santam’s earnings for the period were also affected by the Covid-19 pandemic. A number of claims for Events Cancellation and Travel Insurance were covered in terms of its policies and are in the process of being settled in line with the policy conditions.
- The management actions implemented by Sanlam Corporate in the past 18 months in respect of the repricing of loss-making schemes and improved claims management continued to yield positive results, with Group Risk profit reflecting a major improvement on the comparable four-month period in 2019. Sanlam Corporate’s net result from financial services increased by a particularly satisfactory 34% as a result.