Sanlam is building on its “fortress” strategy and lifted its annual dividend 11% to 400 cents in 2023 after a good performance from its businesses, CEO Paul Hanratty said yesterday.
Some of the difficult areas for the group in 2023 were lower underwriting profit in general insurance, which he said in an online presentation was being addressed by management, and disappointing life insurance flows in the Sanlam/Allianz joint venture, most notably in Botswana and Morocco.
The cash net result from financial services of R12.4bn was 18% higher than 2022. The life insurance portfolio grew 19%, general insurance increased 21%, investment management increased by 14% and credit and structuring 29% higher.
He the “fortress strategy” was adopted after the Covid-pandemic to ensure the group was sustainable in South Africa through all circumstances.
For instance, in 2023, the strategy was furthered by acquiring businesses to “fill the gaps” in the groups’ financial services and insurance portfolios.
It had also involved exiting smaller businesses in Africa to focus on the Sanlam/Allianz joint venture, said Hanratty.
The four acquisitions in South Africa in 2023 were Capital Legacy, which deals with wills and estates, financial and retirement planning group Brightrock.
The minority interests in Sanlam Personal Loans was purchased to begin, in time, growing into the unsecured lending market, while the acquisition of AfroCentric Health would further the entry into health insurance, although health was never likely to be a major component of group earnings, he said.
“These results reflect our focus over the past three years on improving the performance of existing operations, while investing in the long‑term growth path. We remain optimistic about future growth and performance,” Hanratty said.
Ongoing geopolitical conflicts had created risk to the outlook for investment markets, interest rates and inflation. However the group was positive about its growth prospects for 2024, and its high level of solvency, liquidity and low gearing gave it flexibility to face the challenges, he said.
He said the recent Assupol acquisition would likely need to be paid in 2024 with more than the group’s discretionary capital balance at the 2023 year end.
The Namibia business would need to be sold into the Sanlam/Allianz Africa-focused joint venture during the year and Allianz also had an option to increase its stake in the JV.
In addition, “our strong capital position and cash generation, as well the diversity of our operations by product, market segment and geography, position us well to navigate the current macroeconomic environment.”
Growth in 2023 was driven by strong life insurance risk experience, higher investment market levels and overall book growth supporting asset-based revenue in life and investment management, improved performance from the credit portfolio backing life insurance liabilities, and also a strong performance from the credit business in India.
The net results from financial services came to R12.4bn, a record, and 21% higher on a per share basis.
The life insurance portfolio grew earnings by 19%, general insurance by 21%, investment management by 14% and structuring by 29%.
New business volumes remained solid at just under R400bn, also a record high, with robust sales growth across all lines of business. Growth in India in particular, had been strong, and the credit business in that country may need further capital in the future, while its life business could stand on its own feet, he said.
Net client cash flows remained solid despite the challenging consumer environment.
There was a reduction in the group’s number of shares in issue due to share repurchases in 2022 and 2023 and the consolidation of the B-BBEE SPV in the shareholders' fund, following acquisition of the senior ranking preference shares effective June 30, 2023.
Net operational earnings of R13.9bn increased by 25%. The higher growth relative to net result from financial services was due to a higher investment return of R2.1bn versus R1.1bn in 2022, that benefited from the recovery in investment markets over the period, and which also supported the growth in headline earnings.
Hanratty said sales had been strong, overall. Sales mix shifts towards higher-margin products, resulted in improved value of new business and margins. Net value of new covered business increased by 19% and was 16% higher on a constant economic basis, with a new business margin of 2.85%.
Sanlam’s share price slipped 3% to close at R72 yesterday, but was 23.4% higher over a year.
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