Sanlam has set aside the bulk of the discretionary cash of R9.2bn at its disposal to cover the costs of expanding its footprint in India, and cushioning itself against the impact of global trade wars.
The life and insurance group, with R1.5-trillion assets under management, has expanded into the Indian market — the world’s most populous country and one of the fastest-growing emerging markets — where there’s a low penetration of insurance cover.
Speaking at the release of the company’s results for the six months ended June, CEO Paul Hanratty said R5bn of Sanlam’s discretionary capital was ring-fenced for deals it has entered into with Shriram, an Indian financial services firm, which are subject to regulatory approvals.
During the period under review, Sanlam acquired additional shares in Shriram Wealth to focus on the underserved market, increasing its effective economic shareholding from 26% to 49.7%, and its shareholding in Shriram Asset Management Company from 16.3% to 35.5%.
“A huge part of discretionary capital is set aside to cover the Indian business ... that is priority number one. Beyond that, I think it is to maintain an elevated level given some of the geopolitical and tariff challenges that we see,” he said.
Hanratty said the underlying growth drivers in India were a strong GDP growth, followed by “an extremely competitive and entrenched position” Sanlam has in the rural economy in that market.
“We have a really dominant position in the rural economy of India, which is the majority of the economy in India, and we are able to make money at very low level customer wealth. That makes it very difficult for other people to compete with us, so we have a competitive moat in India, our market segment in a strong, growing economy.”
Keagan Higgins, an investment analyst at Anchor Capital, said India was one of Sanlam’s most compelling long-term growth levers.
“Insurance penetration remains exceptionally low, and the economy is growing fast. Through Shriram, Sanlam has wide access to semi-urban and rural customers. That network reach, combined with rising digitalisation, creates both scale and resilience. For example, in the period, India grew new business volumes by 33% in constant currency, while maintaining stable credit experience (despite margin pressure from excess funding),” he said.
Increasing its stake in Shriram Wealth and Shriram AMC signals a deeper commitment to that growing market.
“The Indian exposure provides both growth and geographic diversification,” Higgins said.
Highlights during the half-year under review included a more than doubling of net client cash inflows to R48.5bn, and a 14% increase in earnings. Return on group equity value increased by 18.2% per share.
Assupol has given Sanlam added scale in the retail mass segment, especially at the entry-level of life insurance. Integration is showing real progress, with early synergies evident, a consolidated management team in place, and progress on branch roll-out and consolidation.
— Keagan Higgins, investment analyst at Anchor Capital
Sanlam said it was not contemplating any acquisitions anywhere in the near future, as acquisition deals from the previous year were in the process of being integrated into the business.
In South Africa, the insurer said it was integrating Assupol into its mass market offering, a year after acquiring the business. It said it had progressed well in combining Assupol’s advisor force into the Sanlam advisor force.
Higgins said the acquisition would give the group the competitive edge in the mass market segment.
“Assupol has given Sanlam added scale in the retail mass segment, especially at the entry-level of life insurance. Integration is showing real progress, with early synergies evident, a consolidated management team in place, and progress on branch roll-out and consolidation.”
From an investment perspective, the acquisition has already proven accretive, he said. According to Sanlam, the R6.6bn it paid for Assupol has generated R1.4bn in dividends and now carries a group equity value of R7.1bn, equating to a 29% return since the acquisition.
“However, from a margin perspective, it looks like the entry-level market remains under pressure after the Capitec joint venture exit. While the edge is clear in terms of scale and returns, we think the real test for management will be to leverage this distribution power to drive a sustainable recovery in margins.”
Capitec and Sanlam had a funeral co-product agreement that was terminated in October 2024.
Abigail Mukhuba, financial director at Sanlam, said the increasingly competitive environment in this sector was the reason product solutions offered at the entry-level market must add value to the customer.
“We previously said that if you look at our historical net value of new business [VNB] performance, Capitec was what we call VNB-rich, not so much earnings-rich or net result from financial services rich,” she said.
“Assupol, now, is almost the opposite, where their VNB is strong, not as strong as the Capitec position, and their earnings are much stronger in terms of their contribution. From an entry-level market, we have to ensure we improve our client offering and ensure it will continue to retain persistency and volumes.”
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