Sanlam eyes Malaysian acquisition

Johannesburg - Financial services group Sanlam [JSE:SLM] is in talks for an acquisition in Malaysia, where it could use some of its R4bn in surplus capital, its chief executive said on Thursday.

Sanlam also aims to use the money to increase its stakes in existing businesses in Africa and India, Johan van Zyl told Reuters in an interview.

“We have around R4bn of surplus capital and we’ve always been cautious so we won’t spend all of it,” van Zyl said.

“Our key aim is to work with our partners and get a bigger stake. We know the businesses, we already have management there and that’s the focus for the next year.”

Van Zyl said Sanlam would like to increase its shareholding in the Indian businesses from the current 26% to more than 30%.

Sanlam has reported a 16% rise in its normalised diluted headline earnings per share to 125.5 cents for the six months ended June 2012 from 108.6 cents a year ago.

The group grew new business volumes by 11% to R61bn and increased the net value of new covered business by 38% compared to the same period last year.

Other highlights in the six months were net fund inflows of R10bn and annualised return on Group Equity Value per share of 18.4%.

Commenting on the results‚ van Zyl said: “We are pleased with our performance and despite the economic and regulatory challenges in our industry‚ we remain confident that we have the depth of skills and experience to withstand these challenges.

“We will continue to focus on the execution of the group’s strategy in pursuit of sustainable growth‚” Van Zyl said.

The group was satisfied with the progress made in achieving its priorities for 2012‚ he added.

Sanlam Personal Finance successfully expanded its distribution reach with advisers in the South African entry-level market growing by 12% to 2‚357 from the end of December 2011 (up 20% since June 2011).

Sanlam Investments acquired the 50% interest in Satrix Managers that it did not own. The index tracking market is growing rapidly in South Africa and also globally.

Satrix Managers is the leading manager of listed index tracking instruments in SA and through this transaction Sanlam will have a larger stake in the future growth of this market. Sanlam Investments also acquired a 50% interest in JP Morgan's SA investment administration operations upon its exit from this market segment.

Sanlam Emerging Markets (SEM) achieved exemplary growth in the first half of 2012‚ increasing new business volumes by 40% and net result from financial services by 56%‚ despite challenging economic conditions.

Referring to SEM's progress outside SA‚ van Zyl said that good progress has been made on the regulatory approvals required for the group's acquisition of a 26% interest in Shriram Capital in India.

“We are confident that the final conclusion of this transaction is imminent‚” he said.

He added that while Sanlam would consider attractive expansion opportunities into African countries where the group does not have a presence‚ its immediate focus is on strengthening business relationships in existing operations.

SEM is actively working with its partners to identify appropriate opportunities in this regard. South East Asia has also been identified as a potential growth market and SEM is currently investigating a number of opportunities in the region.

Looking ahead‚ Sanlam expects the operating environment in the second half of the year to remain challenging with weak global economic growth and volatility in investment markets also likely to continue.

In addition‚ positive one-off items in this reporting period as well as in the second half of 2011 are likely to impact on its ability to sustain the current level of growth in operating profit for the full year.

“The financial services industry across the globe is facing a fast changing regulatory landscape. South Africa is no exception with many international developments finding their way into local legislation. Although we are supportive of the objectives of the new regulations‚ the fast pace and simultaneous implementation of the changes place severe pressure on senior resources within the industry and the Sanlam Group. However‚ we remain confident that we have the depth of skills and experience to meet these challenges and to continue relentlessly in the execution of the Group's strategy in pursuit of sustainable delivery‚” the company said.