It was an “excellent” set of results achieved in a challenging environment as cost efficiencies underpinned a 36 percent increase in new business volumes coupled with 71 percent organic growth for Sanlam for the year to December last year.
The life insurer, which in recent years has transformed itself into a diversified financial services group, said that while the industry dealt with a quadruple blow of higher short-term interest rates, tough economic conditions, restricted consumer disposable income and a volatile currency, it did not experience a deterioration in the quality of its business.
Instead, Sanlam grew its market share in general insurance, single premiums and across Africa, the group’s chief executive, Johan van Zyl, said yesterday.
“We are not trying to sell to overindebted consumers, so even if the economic growth in South Africa is not too high, we are positive about prospects.”
Van Zyl said although there had been a slight pick-up in policy lapses, these related to particular incidents such as the platinum sector strikes.
While shrinking disposable incomes affected low- and middle-income households the most, Sanlam reported “tremendous” growth in its entry-level products serving the lower end of the market. And with its focus mainly on these two market segments, Van Zyl was confident the growth reported for last year could be repeated.
“The market penetration in Africa and India is still low and we play in the middle market, which is not serviced well. In South Africa, there is still a lot of room to grow in the entry-level market. We can still have that (organic) growth for another year or two.”
Sanlam is sitting with R4 billion of unallocated discretionary capital that is available for any growth initiatives it might want to pursue.
Van Zyl said the group had a number of opportunities under consideration, and some transactions were likely to be finalised in the near term.
Nothing outside of Sanlam’s current scope would be pursued as the company wanted to deepen its relations with partners in Africa, India and Malaysia first.
“The idea is not to rush to different places but to do more with the partners we have,” Van Zyl said.
Sanlam wanted to add general insurance, property, health and life insurance across all its existing distribution channels and markets. In 2012, Sanlam acquired a 49 percent stake in Malaysia’s Pacific & Orient Insurance, which became effective last year. Now its partner in Nigeria, FBN Life Assurance, has also expanded into general insurance and in South Africa it has Santam.
Last year Sanlam concluded five acquisitions. It now has a direct footprint in 11 African countries, as well as in Europe, Australia, India and Malaysia.
In its results for the year to December, Sanlam said its new business volumes, excluding products not produced by the group, reached R150bn for the first time. The net value of new covered business was up 12 percent to R1.32bn.
Sanlam’s normalised headline earnings a share of R3.95 were up 35 percent, surpassing the company’s targets.
The group’s operating margin improved to 22.2 percent from 19.4 percent.
Return on group equity value per share was 17 percent, down from 22 percent in the previous period.
Sanlam declared a normal dividend of R2 a share, up 21 percent.
The shares lost 2.84 percent to close at R52.27 yesterday.