Sanlam reports resilient performance for 2021 Q1

Cape Town - Sanlam, Africa’s largest non-banking financial services group, today reported achieving a satisfactory performance in the first four months of 2021, despite the impact of the COVID-19 pandemic during the period.

The insurer said that the second wave of COVID-19 in South Africa was more severe than the first wave and had a significant impact on mortality claims in the Group. Within South Africa, mortality claims were R2,7 billion higher than during the same period in 2020.

The Group recorded good growth in both life insurance and investment new business, stating that sales of single premium international products, life annuities and preservation funds were particularly strong, while sales of risk products also improved over the period.

The Group’s South African third-party asset management business, enabled by its empowerment credentials and strong investment offering, is creating a competitive advantage, translating into strong gains in new client cash flows recorded over the period.

Its Pan-Africa businesses continued to yield positive results, with strong growth in new business volumes augmented by a pleasing performance by the general insurance portfolio. This improved operational performance was further supported by the recovery in equity markets in North and West Africa, resulting in positive investment return on insurance funds. 

Key features for the period were:

  • Strong recovery in operating profits from 2020. Net result from financial services increased by 18% on 2020.
  • Strong recovery in new business volumes. New Business volumes were 20% higher than 2020.
  • Strong growth in the Value of New Business (VNB). VNB up by 81% on 2020.
  • Net client cash flows (net fund inflows) grew strongly. Net fund inflows were more than double that of 2020.

Strong performance from African General Insurance business. The Pan-Africa general insurance portfolio recorded a net insurance margin of 13,7%. Both the underwriting margin and investment return on insurance funds were within their respective target ranges.

Sanlam Group CEO Paul Hanratty said, “We are satisfied with the Group’s performance for the period under review. Our performance continues to demonstrate the passion of our workforce and the strength of the underlying operations, built on a foundation of a sound capital base, robust cash generation and a diversified growth profile.”

Strategy

The Group said it made solid progress on implementing its strategy of building a fortress position in South Africa, accelerating growth outside of South Africa and strengthening market positioning where the Group operates outside of Africa. The highlights were:

  • On 3 May 2021, the Group announced its intention to purchase a further 22.8% of Saham Assurance Maroc (increasing its holding to 84.5%).
  • Sanlam Life completed the purchase of a 25% non-controlling minority shareholding in African Rainbow Capital Financial Services Investments Proprietary Limited.
  • The sale of Sanlam UK’s holding in Nucleus Financial Group plc is expected to complete in August 2021.

The insurer stated that its strategy is guided by the Group’s purpose to empower generations to be financially confident, secure and prosperous. Over the period, it launched its new brand promise of helping customers to ‘Live with Confidence’. This promise will be realised in an expanded product offering, data and digital transformation, inclusive wealth creation, building a future-fit culture, innovation, and partnerships.

Earnings

Net result from financial services increased by 18% in the first four months of 2021 relative to the first four months of 2020. Earnings were supported by improved equity and credit markets over the period, which offset the impact of weaker mortality experience in the South African life insurance business.

Sanlam’s South African life insurance business net result from financial services declined by 13% as compared to 2020 as a result of unusually positive mortality experience in the equivalent period in 2020 following the lockdown

Sanlam Emerging Markets recorded a strong performance with net result from financial services increasing by 33%. The improved performance was due to the Sanlam Pan-Africa General Insurance (SPA GI) portfolio and higher earnings from the SPA Life portfolio. The Other International region reported an overall reduction in net result from financial services. This is largely due to the Indian operations with lower earnings at Shriram General Insurance and the credit businesses.

Sanlam Investment Group’s contribution to net result from financial services improved from a loss in the prior period to a profit in the current period, substantially due to a reversal in the marked-to-market losses on local and offshore listed bonds at SanFin.

Santam recorded a satisfactory performance for the four-month period ended 30 April 2021. Santam commenced processing valid contingent business interruption (CBI) claims in January 2021. No significant changes were made to the net CBI provision from that reported at 31 December 2020.

Business Volumes

Despite the challenging operating environment with some governments re-implementing lockdowns or curfews during the first four months of 2021, new business volumes increased by 20% on the prior period and were 58% higher than the corresponding period in 2019.

South Africa, Namibia, Morocco, Ivory Coast, Malaysia and India are some of the markets where Sanlam operates that were under some form of lockdown or curfew over the period.

Overall new business volumes within the South African life and savings business increased by 31% in the first four months of 2021.

Sanlam’s emerging markets businesses recorded overall new business growth of 15%, though the reported growth was negatively impacted by the strength of the rand and the impact of COVID on the Indian operations.

New business volumes at Sanlam’s asset management business increased by 16% and net fund inflows improved to R13,4 billion for the period, relative to outflows of R2,5 billion in the prior period.

Santam achieved satisfactory gross written premium growth of 7% in the conventional insurance business (4% excluding the premium relief support provided to clients in April 2020).

Capital and Solvency

The Group remains well capitalised. The Sanlam Group Solvency Capital Requirement (SCR) cover ratio amounted to 181% on 31 March 2021.

Outlook

Sanlam is of the view the current rate of new business growth is being assisted by the improvement in savings because of the changing spending patterns caused by the pandemic. The Group expects this supportive situation to normalise and therefore expects the growth in new business volumes to moderate at some point.

Significant uncertainty remains around the number and severity of potential further waves of COVID-19 in 2021. The Group expects that it will be able to absorb an increase in claims in the remainder of 2021 utilising reserves.

“Sanlam remains strong and resilient and we are confident that the Group will continue to serve and advise our clients with distinction as we gradually emerge from the COVID pandemic” said Mr. Hanratty.

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