Volatility in SA investment markets and rand value worries Sanlam

Financial services group Sanlam says volatility in SA investments market and the weakening rand presents challenges to its business.  

The group on Thursday, in an operational update for the quarter ended March, said its life insurance business in the retail mass segment was under pressure and consumers had to contend with the weak economic environment. 

“Group net client cash inflows declined to R7.7bn due to lower life insurance single premium sales and increased outflows from savings products in SA, a single large institutional withdrawal from the Sanlam Investments multi-manager, as well as outflows in the UK investment management operations,” the group said. 

The company also reported reduced discretionary capital after a spree of acquisitions it undertook last year. 

Sanlam, Africa’s largest nonbank financial services group, has been aggressive in beefing its presence in its domestic market and the rest of Africa. The biggest deal in which it has been involved in recent times was the tie-up of its local investment management business with Absa’s to create a black-owned asset manager with R1-trillion in assets. 

It has also done a slew of deals with retirement fund administrator Alexforbes, acquired a controlling stake in AfroCentric to move into the health insurance market, and bought out the remaining shares in BrightRock insurance.  

The BrightRock deal, announced in early February, came at the same time it said it would roll one of its fiduciary services units into wills and estate planner Capital Legacy and take a 26% stake in the enlarged entity. 

“The Absa and Alexforbes transactions completed in 2022 and 2023 have contributed positively to earnings in the first quarter and are expected to continue contributing as further synergies are realised. The transactions expected to complete in 2023 are receiving focused management attention and are also anticipated to contribute positively. The proposed Allianz transaction is expected to close in the second half of 2023,” it said on Thursday. 

“The BrightRock corporate transaction is expected to complete in the second quarter of 2023 and Capital Legacy in the third quarter. All required approvals have been received for the AfroCentric transaction and this transaction is now wholly unconditional and will be implemented in accordance with its terms as indicated in the announcement to investors on 8 May 2023.” 

The group’s discretionary capital decreased from R5.3bn at the end of last year to R4.9bn at the end of March. 

This is as a result of share buybacks and acquisitions the company embarked on. Sanlam, worth about R115bn on the JSE, said it had repurchased shares to the value of R347m in the quarter under review, at a discount of more than 11%.  

The group said in March it would take a breather from the buying spree it had been on in the past few years to focus on bedding down and integrating its newly acquired businesses. 

The company said it was worried about the effects of persistent power and their disruptions to business activity.  

“We expect the operating environment to remain challenging for the remainder of the year, particularly considering the recent volatility in SA investment markets, and the value of the rand. 

“We believe we are well positioned to weather short-term volatility, with a robust financial and solvency position, diversification across geographies, lines of business and market segments.” 

khumalok@businesslive.co.za