South Africa’s biggest insurer warns of ‘short-term pain for long-term gain’
Sanlam, Africa’s biggest insurer, has achieved record earnings, with the group remaining positive that the economic challenges facing Africa will be resolved.
In its financial results for the year ended 31 December 2023, Sanlam said that it achieved record earnings, with the cash net result from financial services of R12.4 billion, 18% higher than 2022.
The life insurance portfolio grew by 19%, general insurance by 21%, investment management by 14% and credit and structuring by 29%.
“Growth was driven by strong life insurance risk experience, higher investment market levels and overall book growth supporting asset-based revenue in life and investment management, improved performance from the credit portfolio backing life insurance liabilities, and strong performance from our credit business in India,” the group said.
Thus, the group’s headline earnings per share increased by 48%, from 473 cents in FY22 to 702 cents in FY23.
The group upped its dividend by 11% from 360 cents to 400 cents.
Outlook
The group also remains positive about its prospects in 2024, even if ongoing geopolitical conflicts pose a risk to the outlook of investment markets, interest rates, and inflation—the group’s earnings are highly sensitive to moves in global investment markets.
“Due to the impact of economic conditions on clients in the retail mass market, persistency (the customers who renew their policies every year) challenges continue,” the group said.
“However, actions taken have seen short-duration persistency stabilising. Further management actions to improve resilience to the cyclical economic pressures on clients are being implemented.”
“These actions may negatively impact short-term sales and value of new business in 2024 in the retail mass segment, but will ensure sustainable long-term growth.”
Profits in this segment are still expected to remain robust in 2024 and in line with historical growth levels.
Although the funeral deal with Capitec will be terminated in October 2024, the group’s proposed R6.5 billion purchase of Assupol, together with other strategic activities concluded in 2023, is expected to supplement the new business value lost through Capitec’s termination.
The group also remain positive over the medium to long-term prospects for African countries, with short-term economic challenges set to reverse over time, with good income growth supporting its operations.
The group is also very positive about the medium to long-term prospects of its Indian operations.
Read: Positive turn for businesses in South Africa – but the ‘big three’ problems still stand in the way
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