Most challenging period for Sanlam


Most challenging period for Sanlam

Published Date: 2020-09-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Most challenging period for Sanlam

Covid-19 turned the tables on what started out as a positive year for the insurance group.

After starting the year on the front foot, Sanlam says the onset of Covid-19 transformed its operating environment into one of the most challenging it's ever faced. While the financial services and insurance group managed to grow new business volumes over the first half of the financial year, it expects them also to come under pressure.

In the first two months of the year, Sanlam said most of its businesses outperformed their targets by a healthy margin. However, by the end of June, its operating results were impacted by more than R3 billion in additional charges including provisions for doubtful debt, widening credit spreads resulted in marked-to-market losses, and over R1 billion in Covid-19 related provisions at short-term insurance subsidiary Santam.

The group impaired its investment in pan-African insurance group Saham Finances by about R5.8 billion, saying it would now take longer than expected to achieve the synergies it paid a premium for when it bought the Moroccan-based business. It reduced the equity-accounted carrying value of Shriram Capital in India by about R1.8 billion.

Its net result from financial services, similar to net operating profit, fell 22% to R3.8 billion but was up 18% excluding the impact of Covid-19 on certain earnings components. Similarly, Sanlam Personal Finance, Sanlam Emerging Markets and Sanlam Investment Group also reported sharp declines due to the pandemic but were higher excluding the effect it had on their operations.

Net operational earnings for the period fell 39% to R3.9 billion but headline earnings improved by 10% to R3.89 billion, with headline earnings per share up by the same margin at 188.5c. It reported a basic loss per share of 171c due to the impact of the impairments. Sanlam doesn't pay an interim dividend and said it was too early to given guidance on a dividend at the end of the year.

New business volumes increased by 40% to R157 billion for the period, with net fund inflows rising 44% to R33.4 billion. New funeral policy business sold through its partnership with Capitec Bank increased by 9%.

Sanlam said it provided nearly R4.5 billion to help clients and communities and to rejuvenate the economy, including R2.25 billion of capital to seed three impact funds and back businesses impacted by the pandemic.

With all its key markets continuing to contract, a recovery to 2019 levels of economic activity was only expected in the medium term. It expected growth in new business volumes to reduce towards the end of the year due to deteriorating economic conditions and rising unemployment in SA.

Sanlam's shares closed 0.3% down at R56.41 yesterday.

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