Insurance group Sanlam outperformed peers in a tough domestic economy, posting double-digit earnings growth in its businesses both inside and outside SA, its 2016 financial results showed.
"Given various external headwinds, Sanlam’s operational results were remarkably resilient," said Justin Floor, a portfolio manager at Kagiso Asset Management.
For the year to December 2016, Sanlam reported a 10% increase in net operating profit, boosted by strong performances from underlying businesses.
A decline in investment returns earned on its capital portfolio sent normalised headline earnings down 6% to R8.4bn.
Sanlam Personal Finance, which constitutes almost half of group earnings, grew profit 7% to R4bn.
Following large withdrawals from savings policies, which had hurt Sanlam’s rivals, CEO Ian Kirk said that there were no major concerns around customer persistency.
"The issue there is how you sell and how you service. You have to sell the right product to the right client who has the financial resources to keep up the commitments," he said.
"If you oversell or sell the wrong product and the client comes under pressure, you’ll have poor persistency."
Sanlam Emerging Markets, which includes businesses in Africa, India and Malaysia, grew earnings 30% to R1.6bn.
"We have a portfolio now [in emerging markets] so we can go through [a few] tough years," said Kirk. Despite tough economic conditions in certain jurisdictions, Sanlam was not planning to exit any countries in the rest of Africa, he said.
"We’ve achieved a lot in Nigeria in a tough environment and in Zimbabwe, which is almost an impossible environment to operate in."
The Nigerian business grew its new business contribution 52% to R407m.
The group’s businesses outside SA, including in the UK, now contributed close to 40% to group earnings, Kirk said.
"We see Sanlam’s impressive emerging market platform as the key propellant of longer-term growth, albeit with the potential for volatility along the way," said Floor.
The group exceeded analysts’ expectations on a number of measures, including the value of new business, which, at 18% growth, was considerably more profitable than the market expected, said Adrian Cloete, portfolio manager at
PSG Wealth.
New business volumes increased 11% to R233bn on a group-wide basis.
Sanlam’s group equity value increased 7% to R110.7bn. Growth in group equity value had exceeded the cost of capital over a number of years, said Cloete.
"Sanlam has provided good value for shareholders."
Kirk said that Sanlam had R550m in cash to deploy into existing businesses, with annual capital releases planned of between R500m and R1bn.
Sanlam declared a dividend of 268c a share, 9% ahead of the previous year.
The share ended up 1.49% at R69.47 on Thursday.
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