Sanlam expands Africa footprint as rivals falter

AFRICA’S largest insurer is getting breathing room to build on its biggest-ever acquisition and expand existing operations as rivals scale back on the continent and its main competitor squabbles with its fired chief executive.

Sanlam last year spent about $1.1 billion (R16.72bn) to buy all of Casablanca-based Saham Finances and gain a footprint in more African countries than any other financial-services company outside of banking.

This as South African peers including Liberty Holdings and Momentum Metropolitan Holdings focus on their home market and Old Mutual fights with ex-chief executive Peter Moyo while contending with hyper-inflation in Zimbabwe.

“We might just have a little bit longer to execute on the strategy,” Sanlam chief executive Ian Kirk said. “But of course that doesn’t take the pressure off us to deliver.”

Founded in Cape Town in 1918 and now spanning 33 African countries and 12 others from the US and India to Saudi Arabia and the UK, Sanlam is growing its health, life, property and casualty insurance businesses to entrench its position on the continent.

The insurer is targeting consumers and multinational companies and extending its operations in Morocco, West and East Africa as well as Namibia and Botswana, the chief executive said. It is also seeking a foothold in Egypt.

Sanlam is also looking at ways to bolster its reinsurance capacity with its general insurance unit Santam Ltd and expand offerings to become a top choice for multinational companies and their staff, said Kirk.

The insurer is seeking to benefit from a continent-wide push to improve access to financial services.

Sanlam will look into “bolt-on acquisitions” in one or two countries, Kirk said during the company’s firsthalf results presentation. The firm has a partnership in Ethiopia and will invest in the country when it opens up, he said.

At home, Sanlam will be looking to buy money managers to bulk up assets as the rise of index-tracking funds squeezes margins in the industry, Kirk said.

A wave of mergers and acquisitions could hit the asset-management industry as soon as six months from now, he added. Sanlam wants to build scale through deals and close the gap between mid-tier firms and market leaders, such as Allan Gray and Coronation Fund Managers. It will also use its relationship with African Rainbow Capital as a black-economic empowerment partner to support South Africa’s push to give the black majority a bigger role in the economy.

South Africa has about 50 blackowned asset managers, of which 68 percent are profitable, according to a survey by BEE.conomics, as well as a significant number of medium-sized firms. Changes to the market, such as the rise of passive investments, have made it more difficult for all these companies to earn fees, Kirk said.