Taking Sanlam global… slowly
SHAREHOLDERS IN financial services group Sanlam will applaud its healthy obsession with driving returns in an increasingly regulated and complicated traditional life insurance industry.
Its 2006 annual report highlights the transformation of Sanlam from a stodgy, fairly recently demutualised life insurer in 2001 to a diversified financial services group today.
Its diversification into an increasing spread of financial services businesses throughout a growing number of geographies is seeing shareholders who supported the firm in the dark days of 2002 handsomely rewarded.
Sanlam has consistently traded at a discount to its embedded value.
However, last week the share bypassed its end-of-year embedded value of 2 047c, trading at levels close to 2 100c.
An investment in Sanlam at end-2002 at 760c translated to 1 830c/share by year-end 2006 and the share has seen further growth since.
But a word of warning: much of that performance is linked to the group’s underlying investment portfolio. As equity markets show signs of increasing volatility it will also affect Sanlam’s share performance.
Roy Andersen, in his chairman’s report, says prospects remain good despite the market volatility.
Preparations for 2010 and Government’s commitment to investment in services and infrastructure bode well for SA’s reputation as an investment destination, Andersen says.
Unlike Old Mutual, Sanlam has been content to focus on its home market despite some tentative forays into international markets.
But CEO Johan Van Zyl is now preparing to spread the company’s wings.
“Certain emerging markets offer high growth opportunities that fit Sanlam’s competitive advantage in highvolume, low-value retail financial services. Our strategy remains to partner with local and global players to help us execute any geographic expansion,” writes Van Zyl.
Investors will hope he’s been following the trials and tribulations of Discovery’s costly expansion in the US.