Pension fund withdrawals hurt Sanlam
A total of R13bn pulled out so far this year
SANLAM yesterday announced that two major pension funds had withdrawn a total of R13 billion of their funds managed by the group as the financial services group reported disappointing interim results.
The Public Investment Corporation had made an extra withdrawal of R10bn of its assets managed by Sanlam Investments as part of the restructuring of its investment portfolio, the insurance and financial services group said.
This follows a withdrawal in 2014 by the Botswana Public Officers Pension Fund (BPOPF) of R11.5bn from the group’s Botswana asset manager.
Volatility
Sanlam, the largest South African-based insurer, said in its interim results for June this year that withdrawal also coincided with a simultaneous withdrawal by the BPOPF of roughly R3bn from Sanlam Investments’ International asset management business.
“Excluding these flows, net fund inflows increased by some 10 percent on the comparable 2014 period,” the group said yesterday. Sanlam said profit in the six months to June rose 8.3 percent as it sold more policies even as volatility hurt investment returns and growth in its home market slowed.
Net income climbed
to R5.49bn in the first half, from a reviewed R5.07bn a year earlier, Sanlam added.
New business volumes rose 22 percent to R100bn. The insurer does not pay half-year dividends.
Sanlam said diluted headline earnings grew 6 percent to 233.1c per share in the six months to June, a slowdown from a year ago as weak commodity prices hit businesses in Ghana and Zambia.
Avior Research insurance analyst WJ de Vries said Sanlam’s results were disappointing, particularly in comparison to Liberty and Old Mutual, especially in the emerging markets and Africa where the others did well.
“I am wary about whether they understand the new businesses, the group has been growing mostly through acquisitions. Historically they have had a good record offshore, but at this stage it does not look all that attractive,” he said.
Organic growth
Another analyst, who declined to be named, said the group had a disappointing performance at its emerging markets business and that it would do well to focus on organic growth than further acquisitions.
Sanlam shares on the JSE yesterday fell by 1.74 percent to close at R61.41.
The group is the worst-performing stock on the six-member FTSE/JSE Africa Life Assurers index this year, having dropped 12.27 percent compared with the index’s 3.77 percent gain.
The group has been expanding in Africa and Asia to help boost profit as the South African economy slows.
“With that R2.5bn discretionary capital, we will continue to find growth opportunities primarily in the emerging market territories,” said Sanlam chief executive Ian Kirk, adding that most of the money would be spent elsewhere in Africa.
Sanlam, which operates in several African countries, including oil-rich Ghana and Africa’s biggest economy Nigeria, and in India and Malaysia, is in talks about an acquisition in Angola, the head of the company’s emerging markets unit said last week.
Turning to the outlook, Sanlam said: “We expect that the economic and operating environment will remain challenging for the remainder of 2015 with a resulting impact on the group’s key operational performance indicators.”
Interest rates, financial market returns and volatility “may have a major impact on the growth in normalised headline earnings and group equity value”. – Additional reporting by Bloomberg and Reuters
Historically they have had a good record offshore, but at this stage it does not look all that attractive.