Sanlam achieves resilient underlying operational performance amid Covid-19 operating environment
Announcing its interim results for the six months ended 30 June 2020, Sanlam today reported a resilient underlying operational performance and a healthy solvency position amidst the most challenging period faced by the Group in many decades, caused by the global coronavirus (COVID-19) pandemic.
The resilient performance was attributed to the quality of Sanlam’s client and other stakeholder relationships, a superior strategic positioning, highly skilled and motivated employees, and a prudent approach to managing capital.
Highlights and lowlights for the six months include:
Sanlam has delivered these results while providing nearly R4.5 billion to help clients, communities, and to rejuvenate the economy. This support ranged from pledges, client relief efforts, and a R2.25bn of capital to seed three impact funds to protect jobs and back South African businesses impacted by the pandemic.
The Group commenced the 2020 financial year from a solid base, with growth accelerating for most businesses in the second half of 2019. While the Group recognised that it would continue to face headwinds in some of its key markets in 2020 due to subdued economic growth, management remained confident in the business’ ability to deliver solid growth on key performance indicators.
However, the global coronavirus pandemic outbreak, followed by the declaration of states of disaster and emergency in several countries where we operate, abruptly transformed the operating environment into one of the most challenging periods faced by the Group and its stakeholders.
As indicated in previous COVID-19 operational updates, Sanlam responded rapidly to the lockdowns and curfews implemented in most of its markets, with no significant disruption in back office operations.
General restrictions on face-to-face sales had a severe impact on new life (covered) business sales and the value of new covered business written (VNB). The impact on new business was particularly severe at the outset of the restrictions, but there has been a continued recovery as digital technology was rapidly adopted to allow for new business to be written.
Sanlam Group Chief Executive Officer Paul Hanratty said, “Amidst the challenging operating environment, we are satisfied with the resilience reflected in our underlying operational performance. This is testimony to our dedicated employees and prudent approach to managing our business. Further, our prudent approach to capital management served us well during the turbulent times, with a Group solvency cover ratio of 187% at 30 June 2020 and with the ratio remaining resilient throughout the worst of the market turbulence. This positions us favourably to take advantage of opportunities that may emerge from the current challenging environment.”
New Business Volumes
Sanlam’s intermediated distribution channels were generally not regarded as essential services in those countries that imposed lockdowns to prevent the spread of the coronavirus, severely hampering the Group’s sales forces reliant on face-to-face client interactions.
Life insurance sales were most severely impacted, with monthly sales volumes lagging targets by between 50% and 90% across many lines of business in the months of April, May and June 2020.
Digital and direct businesses, such as Sanlam Indie, MiWayLife and Sanlam Direct, and digital sales tools available to certain retail distribution channels provided some relief, but could not mitigate against markedly lower sales from the other traditional channels.
Requests for new business quotes at Sanlam Corporate stalled in the second quarter, despite the business being able to support clients remotely through the peak of the South African lockdown.
Sanlam Investment Group (SIG) bucked the trend and received sizable new mandates in the second quarter of 2020, surpassing its first quarter performance. Excluding SIG, overall new business written in the second quarter of 2020 reduced by 16% compared to the first quarter of 2020.