Sanlam sees some progress in resolving SA energy, logistics hurdles

Sanlam offices in FloraCliffe. Picture: Karen Sandison/Independent Newspapers.

Sanlam offices in FloraCliffe. Picture: Karen Sandison/Independent Newspapers.

Published May 17, 2024


SHARES in South African insurance company Sanlam closed yesterday’s trade session on the JSE firmer by 1.64% after the company said it was supportive of progress made in improving the country’s energy and logistical challenges.

The 1.64% rise in Sanlam’s share price took it to R73.23, although it stated that it would benefit more from improved economic growth in the country.

This comes as South Africa’s economic growth for this year has been projected at around 1%.

“Sanlam remains supportive of the work being done to improve energy supply, logistics, crime, and corruption and to create new jobs in South Africa,” the company said.

“We remain committed to supporting, and benefiting from, an improved growth rate for the South African economy.”

In the quarter to the end of March, Sanlam reported a stronger net performance for its South African general insurance category.

However, there was weaker performance from Pan-African markets due to a change in accounting policy for the regional operations.

“Excluding this impact, general insurance profits are strongly up, benefiting from good underwriting results and growth in premiums.

“In South Africa, Santam recorded an underwriting margin within its target range of 5% to 10%, with results further supported by favourable investment return on insurance funds,” Sanlam said.

Growth in South Africa boosted Sanlam’s investment management performance for the quarter to March by 4%. However, lower earnings in the international operations due to lower assets under management from significant net outflows in prior periods dampened this.

New business volumes for Sanlam’s life insurance received a boost from strong sales in South Africa, which recorded good growth in retail mass sales as well as strong single premium sales in the retail affluent and corporate businesses.

“Life insurance recorded double digit growth in both earnings and new business volumes, with new business margins remaining robust,” the company said.

Across its segments, Sanlam maintained strong momentum from 2023 into the first quarter of 2024 despite a challenging backdrop marked by geopolitical conflict, sustained high global interest rates and inflation.

Volatility in investment markets also provided some headwinds.

This saw Sanlam’s cash net result from financial services increasing by 14%, with net operational earnings rising 16% after benefiting from improved investment return.

The group closed the quarter under review with net client cash inflows that were 14% better at R8.8 billion.

This has been attributed to the rebound in life insurance and an improvement in the international asset management operations.

Sanlam’s discretionary capital balance for the period increased to R3.7bn compared to R2.7bn at the end of the December 2023 quarter.

“The increase is due to the net proceeds received from the sale of a portion of Sanlam’s direct holding in Shriram Finance Limited, which was partially reduced by R1.7bn relating mainly to the mandatory offer to minority shareholders in Sanlam Maroc SA as part of the SanlamAllianz transaction,” it said.

The company anticipates global inflation and interest rates to remain stubbornly high.

However, Sanlam said it was “insulated from the effect of this” as it would “benefit from the eventual normalisation” of these macro variables.

“The group remains concerned at the risks posed by global geopolitics, but the group’s balance sheet remains strong and able to withstand macro shocks.”