7 December 2022
The rise in inflation and interest rates continues to affect global investment markets, and the ability of clients to commit to new insurance and investment products and retain existing arrangements. The Group’s diversity stood it in good stead in successfully navigating the challenging environment.
Net result from financial services from life insurance increased by 23%, asset management by 21% (excluding UK asset disposals) and credit and structuring operations by 17%. General insurance operations declined by 50%. This resulted in Group net result from financial services decreasing by 1%.
Life insurance earnings benefitted from lower mortality claims versus the comparative period across all operations following diminished COVID-19 impacts.
Credit and structuring
Credit and structuring earnings growth was buoyed by good performances from the Shriram businesses in India, underpinned by continued strong economic recovery in that market.
General insurance earnings remained under pressure due to significant claims inflation, market volatility and, in South Africa, high levels of electrical power-surge and vehicle theft-related claims, as well as the adverse weather conditions and catastrophic floods reported in the first half of the year in KwaZulu-Natal. Corrective and mitigating actions have been implemented across the portfolio and improving trends have been observed in the South African operations.
Sanlam Pan Africa’s general insurance results continue to be impacted by weak investment returns on insurance funds, while claims inflation impacted underwriting performance in the four months since June 2022.
The diversity of revenue streams and strong net client cash inflows in recent periods supported investment management earnings, which were strong in the context of significant volatility in global investment markets.
New business volumes in life insurance operations remain at very strong levels, but were marginally lower on a comparative basis, off a very high base driven by the COVID-19 lockdowns.
General insurance new business volumes showed robust growth, with a strong focus on appropriate pricing and risk selection.
Net fund inflows in investment management operations remained at high levels despite significant investment market volatility but declined from the elevated level of 2021.
Life insurance net client cash inflows improved significantly due to lower mortality claim payments and continued strong absolute levels of new business volumes.
Investment management recorded net client cash inflows of R26 billion, a strong performance albeit lower that the comparative period, reflecting the unusually good experience of 2021 and continued investment market volatility in 2022.
The Group continues to progress on its journey to becoming an African champion by building a fortress position in South Africa and accelerating growth outside of South Africa.
In South Africa, Sanlam completed the acquisition of the Alexforbes life book and the sale of the Sanlam standalone retirement fund administration business to Alexforbes. The Alexforbes life book has been integrated into Sanlam Life and has contributed to the strong performance of life insurance operations. The Absa investment management transaction was completed in early December and work has commenced on integration.
These transactions simplify Sanlam’s operations and place the organisation’s group risk and asset management operations in leading positions in their respective market segments.
In implementing its fortress South Africa strategy, Sanlam made an offer to acquire a majority shareholding in AfroCentric. The proposed transaction will enhance Sanlam’s client offering and enable a leading position in health insurance and administration in South Africa. The transaction is subject to AfroCentric shareholder and regulatory approvals.
Sanlam’s InsurTech joint venture with MTN (aYo) became effective on 31 October 2022 and the Group will support the continued growth of aYo as it expands across Africa and enables financial inclusion across the continent. aYo currently has over four million active policies and is operational in four countries (Côte d’Ivoire, Ghana, Uganda and Zambia), with three more currently operationalising (Cameroon, Nigeria and South Africa).
Regulatory approvals for the proposed joint venture with Allianz are progressing according to plan and are expected to be complete by mid-2023.
In India, the merger of the Shriram credit businesses is expected to be completed this December. This merger simplifies the Shriram Group structure and is expected to create further value over time through cost and other synergies.
The capital and solvency position of the Group and its main operating entities remained strong and within target ranges on 30 September 2022. The Group solvency cover ratio was 173% on 30 September 2022. Sanlam Life solo solvency ratio was 253% and Life covered business solvency ratio of 177%. Discretionary capital balance was R5,3 billion on 31 October 2022.
Sanlam Group CEO, Mr Paul Hanratty, said, “I am pleased with the Group’s robust performance for the 10 months of 2022. This set of results reflects Sanlam’s strength and our ability to deliver sustainable value in the most challenging operating environments.
“However, we expect the operating environment to remain challenging for the foreseeable future. We expect inflationary pressures to continue affecting underwriting margins in our general insurance operations in the near term, as corrective actions on repricing will take some time to fully implement across the portfolio. The strategic transactions completed in 2022, including the Absa transaction, are expected to contribute in 2023, which will support earnings growth while our general insurance operations recover.”