Markets

Sanlam interims: Expansion in emerging markets

NASTASSIA ARENDSE:  Life insurer Sanlam reported a 19% [technical] drop in half-year profit, and this was due to the recession in its home market here in South Africa. Ian Kirk, the group CEO for Sanlam, joins me now on the line for a breakdown on the numbers. Ian, thanks so much for your time

IAN KIRK:  Thank you.

NASTASSIA ARENDSE:  You reported the figures this morning. How did you do, especially when you look at the different business units?

IAN KIRK:  We are pleased with the performance in challenging times. Just one point. The 19% you refer to – that’s a bit of a technical thing. We had to raise a large deferred tax asset in the prior period. The more accurate number is the 5% growth in normalised headline earnings per share.

In the times that we are in, Nastassia, we are pleased. On a relative basis again we’ve outperformed. In absolute numbers of course, one would hope for stronger, but we are still 65, 70% South Africa-based. And, as you know, South Africa is having a tough time.

So if we go through the businesses, the SPF business, we are happy it did well. Sanlam Emerging Markets also performed nicely. Santam took a bit of hit on the catastrophe events in June. That obviously set them back quite substantially relative to a good period in the prior year.

Then this [?] cluster had the greatest growth, over 30% in their profitability.

And the investment business did well in the UK, which is quite nice because we’ve struggled a bit there. It came under some fee pressure in South Africa. The markets didn’t move and it came under some fee pressure as a result of that.

Overall pleasing. The diversification of the group certainly helped us. But South Africa was challenging, and that’s the biggest for us.

NASTASSIA ARENDSE:  You have exposure in India and Malaysia as well. I’ll start off with Malaysia. Their economic momentum seems to be stabilising. To what extent are you able to increase your progress there and diversify some of your operations at this point?

IAN KIRK:  Our plan is not to go beyond the life insurance and general insurance business that we’ve got there. We had at one stage greater plans for the region, but we are happy to stay where we are in terms of Malaysia at this stage, given our focus on the African continent.

In the Pacific and Orient, which is the general insurance business, we need to work a bit harder at the diversification. We are very exposed to the motor market and the motorcycles in particular. So there is some work to be done there. We are making some progress on the life insurance, but again we need to diversify that business as we have in other territories. So I would say it’s a bit of work-in-progress.

In India, on the other hand, we are doing very well. In this particular reporting period – because we report three months in arrears – we had to make some additional provisions for the impact of the demonetisation. But the Indian economy is through that one and the business is in good shape. So India is a very positive opportunity and a very good diversifier for our focus on Africa. We are just happy we are there.

NASTASSIA ARENDSE:  One thing about this week, with all the CEOs announcing their results, is that they all seem to have an Africa presence. In your case, how are you approaching the rest of Africa businesses? I see some talk about subdued economic growth, and finding find East Africa quite exciting. Your stance on Africa right now?

IAN KIRK:  We are very diversified, probably the most diversified. We’re in 34 countries and in each country we’ve got a minimum of two businesses – life insurance and general insurance. So obviously it’s a big play for us, and we’ll continue to develop the business out. We see ourselves as being there for the corporate market, and really you need to be there where the corporates are to support the independent intermediaries, the internationals in particular. Again, we support them. That’s on top of the local commercial business and retail business.

So it’s something we’ve carefully thought through over a period of time and we are very comfortable where we are. There will be headwinds in certain countries. Nigeria, for example, remains overexposed to the oil. Angola the same. We had Zambia last year on the copper, but they’ve recovered a little bit. So you do get these scenarios. But with the portfolio approach 34 countries you have to kind of anticipate that each one is a little different. There is no such thing as one continent of Africa. It’s 54 countries.

But it’s a very, very important  opportunity for the Sanlam Group.

NASTASSIA ARENDSE:  Right, Ian. Thank you so much for your time this evening.

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