Rising claims and bad weather affects Sanlam as insurer reports decline in earnings and lower returns
PAN-AFRICAN financial services group Sanlam reported lower mortality claims in the six months to June 30 relative to the same period in 2021 after Covid-19 impacts eased and life insurance earnings rebounded.
The group’s general insurance operations, however, reported a large earnings decline due to bad weather conditions including the KwaZuluNatal floods, rising claims and steeply rising claims costs, as well as lower investment return on insurance funds.
However, the group said yesterday that its diversification had helped it to navigate the challenging global economic backdrop, and its overall operating results were strong.
Group investment management operations reported strong earnings growth despite lower returns in global markets, and after benefiting from strong recent net inflows, performance and fund establishment fees, as well as growth in brokerage income.
Credit and structuring earnings also saw growth driven by improved performances in South Africa and India.
The net result from financial services from life insurance was up 23 percent, asset management was up 25 percent and credit operations were up 22 percent. The net result from financial services from general insurance operations, however, fell 57 percent. The overall net result from financial services increased by 1 percent to R4.6 billion.
Adjusted return on Group Equity Value came to 6.8 percent (14.1 percent annualised), relative to a hurdle of 6.9 percent (14.3 percent annualised).
The group solvency ratio remained strong at 174 percent, well within target range of 150 to 190 percent. Discretionary capital increased from R2.9bn to R6.6bn.
Group chief executive Paul Hanratty
said in a statement: “The strong operating performance has reinforced Sanlam’s purpose, which is to help our clients live with confidence by empowering them to be financially confident, secure and prosperous.”
Sanlam’s Pan-African operations experienced lower investment return on insurance funds due to the decline in Moroccan equity markets. In terms of new business, Sanlam Group maintained good performance across its markets and product lines, strengthening its market position in almost all areas.
Life insurance new business volumes declined 1 percent due to lower single premium sales in the South African Retail Affluent business. All other businesses recorded satisfactory growth in new business volumes.
Life insurance net client cash inflows improved due to the decline in outflows from lower mortality claim payments relative to the first six months of 2021.
General Insurance new business volumes increased 6 percent, reflecting good growth from the Pan-African operations and Santam, but a weaker performance from India operations.
However, net client cash flows fell due to the significant claim payments at Santam owing to the adverse weather conditions and the KwaZulu-Natal floods.
The group’s digital transformation initiatives were progressing and the InsurTech joint venture with MTN was progressing through regulatory approvals – the aYo platform had more than 4 million active policies.
The group completed a partial exit from the UK, with only a focused international asset manager remaining. The group realised proceeds of some R5bn from these transactions.
The Competition Commission recently indicated it was investigating certain pricing practices in the life insurance industry. Sanlam said it adhered to the highest ethical standards and to all relevant legislation.