Sanlam CEO Paul Hanratty says the group will be taking a breather from the buying spree it has been on in the past few years to focus on bedding down and integrating its newly acquired businesses.
Africa’s largest nonbank financial services group has been beefing up its presence in SA and the rest of Africa, even as it spread its wings as far afield as Morocco and India, as part of a strategy of giving it a fortress position in its home markets. Arguably its most prominent deal has been the one that will see it combine its local investment management business with Absa’s to create a black-owned asset manager with R1-trillion in assets.
It has also done a slew of deals with retirement fund administrator Alexforbes, acquired a controlling stake in AfroCentric to move into the health insurance market, and bought out the remaining shares in BrightRock insurance. The BrightRock deal, announced in early February, came at the same time it said it would roll one of its fiduciary services units into wills and estate planner Capital Legacy and take a 26% stake in the enlarged entity.
“I think we’ve now done pretty much everything that we need to do,” Hanratty told Business Day on Thursday after the group announced its results for the 12 months to end-December 2022.
“We’re now very focused for the next three years just on bedding down what we’ve done, integrating it, extracting synergies, settling in the people that have come across,” he added. “It obviously doesn’t mean we wouldn’t look at anything else but it is a period for us of digesting and consolidating and getting ready to think about what we do next.”
Hanratty's comments came after the Cape Town-based group declared a dividend of 360c per share for the year to end-December 2022, 8% more than the 334c per share the previous year. Sanlam’s headline earnings rose 2.8% in the period to R9.294bn , up from R R9.041bn in 2021.
The group also delivered an 8% increase in its net results from financial services, its earnings metric, which rose to a record high of R10.191bn in 2022. Group equity value (GEV) amounted to R141bn or 6,380c per share on December 31 2022, with return on group equity value (RoGEV) of 4.3% for the year.
Sanlam’s results were delivered against the backdrop of a challenging operating environment characterised by significant financial market volatility, heightened risk aversion due to Russia’s invasion of Ukraine, surging inflation and energy prices. The period also saw severe supply-chain disruptions, catastrophic flooding in KwaZulu-Natal, persistent load-shedding and heightened consumer hardship in SA.
During 2022 Sanlam redeployed capital from the UK to bolster its SA balance sheet as it pursued a series of strategic investments in what remains its market.
“We were very anxious to reshape our capital allocation and strengthen the SA business and strengthen what we’ve got on the continent,” said Hanratty.
Sanlam is also pursuing a joint venture with German financial services group Allianz as part of a strategy to considerably expand and diversify its Pan African business. The creation of this joint venture, which also remains subject to regulatory approval, has not required any further capital deployment.
The merger of Sanlam’s Shriram credit businesses in India created one of the largest non-banking financial groups in India, which the group says opens up opportunities for cross-selling. Sanlam also finalised a deal with MTN that will see it roll out insurance products across the mobile operator’s client base in Africa.
Despite the group’s robust performance in 2022, new business volumes in its life insurance operations fell 5% to R64.8bn. General insurance net result from financial services also declined by 32% to R1.728bn due to significant claims inflation, adverse weather conditions and investment market volatility.
“The general insurance sector of our business has struggled in 2022,” said Hanratty, adding that the group’s 62.3% holding in Santam exposed it to the impact of insurance claims on that business. Santam paid a record R29.8bn in gross claims in 2022 due to flooding, load-shedding-related power surges, fire and crime.
“We’ve had a surge in vehicle theft in one particular luxury SUV,” said Hanratty, adding that management had to work with the affected vehicle manufacturer to remedy defects in its security systems.
“We really need a good year [from the general insurance business] — particularly from Santam — in 2023 because two out of the last three years have been really awful,” Hanratty said.
Sanlam’s investment management business saw net client inflows of R21.976bn over the course of 2022 despite severe market volatility. However, this was still 56% less than the R49.671bn in net inflows recorded in 2021, which was an exceptionally good year for the business.
theunisseng@businesslive.co.za
Updated: March 09 2023
This article has been updated with additional information
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