Sanlam achieves solid operational performance for the year ended 31 December 2019, amid challenging
Announcing its annual results for the year ended 31 December 2019, Sanlam today reported a solid operational performance, reflected in growth of 14% and 15% respectively in net operational earnings and the net value of new covered business (VNB) written, as well as a 37% increase in net fund inflows. The 14% increase in net operational earnings is the combination of 9% growth in net result from financial services (net operating profit earned by the Group businesses) and very strong growth in net investment return earned on the Group’s capital portfolios. The latter benefited from a relatively stronger investment market performance in 2019.
All major businesses achieved solid growth in net result from financial services, apart from Sanlam Investment Group’s wealth and advisory businesses in the United Kingdom, and Saham’s general insurance business.
New business volumes increased by 12% despite low investor confidence in South Africa and lower investment inflows in the UK, Namibia and Kenya. Life insurance new business volumes grew marginally, investment business inflows grew by 14%, while general insurance earned premiums were up 22%.
Operational performance highlights included:
Strong growth in key earnings and new business performance indicators
Record net fund inflows into Sanlam Investment Group (SIG) third party asset manager
Value through partnerships: Capitec Bank funeral business policies sold since launch in May 2018 reached 1.4 million
Turnaround in Sanlam Corporate underwriting profit and Glacier new business performance since 1H19
Santam underwriting margin of 7.7% at the upper end of its target range
Quality of earnings: Continued positive experience variances and resilient persistency amid difficult operating conditions
7.1% growth in Sanlam’s dividend to 334 cents (3% real growth)
The Group delivered the performance amid headwinds including low economic growth in some of the Group’s key markets, heightened global geopolitical risks and volatility in investment and currency markets.
Amid these headwinds, the business did not meet its target for Return on Group Equity Value (RoGEV), achieving RoGEV per share of 6.4% (11.9% on an adjusted basis) lagging the target of 13.5%. The reasons for this underperformance included:
The impact of currency movements;
Pressure on the share prices of Santam, Afrocentric and the Group’s listed businesses in India and Namibia;
Reduced valuation assumptions at the South African wealth and investment management businesses in the context of the South African operating environment; and
A decline in the Saham valuation to allow for the current weak claims experience in Africa and the deterioration in the Lebanese economy.
The Group’s diversification across geographies, market segments and lines of business, supported by a highly motivated and skilled human capital base, enabled the business to navigate the operating challenges and continue delivering value to Sanlam shareholders.
Sanlam Group Chief Executive Officer, Mr Ian Kirk, said: “We are satisfied with the performance achieved amid a challenging operating environment. Our relatively good performance is due to two key factors. First, we have a solid strategy and our executives and staff are aligned on the strategy. Second, we have demonstrated over many years an ability to execute on the strategy and that’s really a testimony to the diligence and dedication of our people at Sanlam. We remain confident that our strategy and talent will continue to deliver value to all our stakeholders and enhance our brand proposition.”