Sanlam rides out difficult trading environment

 ·8 Sep 2022

Financial services group Sanlam Group on Thursday (8 September) published interim Results for the six months ended June 2022, showing a decline in headline earnings under a difficult trading environment.

The group noted that the operating environment in the first six months of 2022 was significantly affected by the broader impacts of the Russian-Ukraine conflict which resulted in increased commodity prices, especially energy prices. “The consequent surge in global inflation in the second quarter of 2022 weighed heavily on GDP growth and on the financial wellbeing of consumers,” it said.

“In South Africa, after a strong first quarter, it is estimated that the combination of the KwaZulu-Natal floods and electricity load shedding resulted in a material contraction in real GDP in the second quarter of 2022. Broadening price pressures raises concern around the erosion of real personal disposable income, especially among low-income earners.”

The overall net result from financial services was flat (1%) at R4.6 billion, while net operational earnings declined 7%. Headline earnings declined 8% to R3.68 billion, and the group recorded a 7% drop in diluted headline earnings per share to 177 cents.

Sanlam said that lower mortality claims relative to the first six months of 2021 contributed to a rebound in life insurance earnings as a result of the impacts of Covid-19 coming under control.

The group said its investment management operations reported strong earnings growth despite lower returns in global markets, benefiting from strong recent net inflows, performance and fund establishment fees, as well as growth in brokerage income.

Sanlam said its general insurance operations, however, recorded large declines in earnings, with results impacted by adverse weather conditions including the KwaZulu-Natal floods, rising claims and steeply rising claims costs, as well as lower investment return on insurance funds.

In South Africa, the Group completed the acquisition and integration of the Alexforbes life book. “The Absa investment management, Alexforbes standalone retirement fund administration and Alexforbes LISP transactions are progressing though their respective regulatory approval processes, having received Competition authority support, and are on track to close before the end of 2022,” it said.

These transactions will simplify Sanlam’s operations and place the group risk, asset management and LISP operations in leading positions in their respective market segments, it added.

The group said it continues to progress on digital transformation initiatives. The InsurTech JV with MTN (aYo) is progressing through regulatory approvals. The aYo platform has over 4 million active policies and is a key enabler of Sanlam’s aim to improve financial inclusion across the continent.

“The overall capital strength of Sanlam, our diversified portfolio, strong competitive position in each market in which we operate and record of execution, remain key differentiators. The Group remains well positioned and will continue to deliver long-term value to all stakeholders as we implement our purpose-led strategy, despite the difficult operating environment that is likely to persist for the remainder of 2022,” said chief executive officer, Paul Hanratty.

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