Sanlam has shot down speculation that it is planning to open a transactional bank as part of its strategy to build a fortress position in SA that has seen it splash out billions of rand for acquisitions.
The group’s rival, Old Mutual, is planning to open a mass-market bank capable of taking on the likes of Capitec in the second half of this year.
Sanlam CEO Paul Hanratty said on Friday that its multibillion-rand bid for Assupol, which beefs up its retail mass cluster, is not an indication the group has plans to open a bank.
“I am quite allergic to this concept of banking. We have a big credit advice business and we increasingly do credit products, but we are not ready to be become a full-scale bank,” Hanratty said, responding to a question from an investor.
The investor pressed Hanratty on the issue of the bank, asking whether Sanlam is considering buying a stake in an existing small bank.
Hanratty, who took over the reins at the Cape Town-based financial services major in 2020, said such an investment was not on the cards. “It doesn’t mean we won’t partner with a retail bank to provide services. We actually have a very good payments business with Sanlam. We think there is an awful lot we can do with any bank.”
Sanlam and SA’s biggest retail bank by customers, Capitec, recently terminated their funeral product co-operation agreement. This is after Capitec, which has 21-million customers, decided to go its own way with the imminent launch of Capitec Life, after getting a licence to conduct life insurance business in SA.
Hanratty said the R6.5bn bid for Assupol is meant to derive long-term value for shareholders.
“The long-term future of SA is around the broad middle market no matter which industry you’re in. So, for us, we have been relatively underweight and it is a strategic step for us,” he said. “You have to look at the strategic nature and not just financial matters. It is critical for us, that is why we are so pleased about this [transaction].”
Assupol came into play last year when its majority shareholder Budvest, which holds 46% of the company’s securities, and the World Bank’s International Finance Corporation, which has 19.41%, indicated their intention to sell their stakes. Both entities have been shareholders in Assupol for a decade.
The deal’s price tag suggests a big payday for the IFC, which invested just R170m in Assupol in 2012.
Assupol chair Reuel Khoza said the mooted acquisition by Sanlam will bring even greater opportunities for growth and success.
“Assupol has always been a stable company, generating great value for its shareholders and all its stakeholders.... It will not only strengthen our position in the market but also enhance our ability to provide exceptional value to our clients. We are excited about this new chapter and look forward to the benefits it will bring to both our employees and our clients,” Khoza said.
Assupol traces its roots to 1913 as a burial society for members of the then SA Police. The business has since morphed into a fully fledged life insurer.
Should the deal pass the regulatory hurdles, it will see Assupol become a member of Sanlam’s retail mass cluster.
Sanlam said should the deal get the regulatory approvals, Assupol, which had gross insurance premium revenue of more than R5bn at June 2023, will continue trading under its name.
Hanratty said there are many synergies between the group’s retail mass cluster and Assupol’s business.
“The proposed acquisition will allow us to strengthen our fortress SA strategy and signifies Sanlam’s commitment to further long-term investment in SA. It places Sanlam in a strong competitive position in the retail mass segment of the SA market, thereby embedding our commitment to SA. Given the envisaged synergies, we are confident it will deliver accretive value for all our stakeholders,” he said.
Sanlam’s three-pronged strategy is to grow its dominance in its home market, expand in the rest of the continent and build a scalable nonbanking financial institution in India.
To this end, Sanlam in 2023 acquired a 60% stake in health insurer AfroCentric, added Capital Legacy to provide wills and estate services to local clients, and completed the buyout of the remaining shareholders in insurer BrightRock.
There was also the tie-up of its local investment management business with Absa to create an asset manager with R1-trillion in assets.
Six month ago, the group announced a joint venture — SanlamAllianz — with Europe’s largest insurer, Allianz, that will pool most of their businesses on the continent to create a financial services partnership worth about R35bn.
SanlamAllianz will have a presence in eight of the 10 largest African markets, with the main drawcard for Sanlam being Egypt, a market it has yearned to play in for years.
Correction: February 6
An earlier version of this story incorrectly said Bidvest is the shareholder in Assupol, it is in fact Budvest that has a stake in the company. We regret the error.
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