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The country’s biggest life insurer, Sanlam, says as the going gets tough in South Africa, the only way insurers can grow is to take market share from one another because the market is not growing.
In the year to end-December, the insurer's earnings were hurt by one-off expenses, including the R1.7 billion spent on the broad-based black economic empowerment (B-BBEE) deal that the company finalised in March 2019. Sanlam posted an 18% dive in headline earnings to R7.5bn.
READ | Sanlam likely third major life insurer to record profit declines
CEO Ian Kirk said the fall was almost entirely because of non-recurring expenses. The insurer grew its net operating earnings by 14% on the back of increased insurance sales and a 37% surge in net fund inflows.
“It was better than what we expected, better than what I expected at half-year mark. We had a very strong recovery in the second half. We had better underwriting results under the corporate cluster and Sanlam Personal Finance did very well for a mature business under tough conditions,” said Kirk.
While 2019 surprised him on the upside, Kirk isn’t expecting 2020 to be a breeze as rolling blackouts and the coronavirus put brakes on the economy and consumers' disposable incomes. The slumping stock markets will also hit Sanlam’s investment business.
“Look, 2019 was tough, 2020 will be as tough,” said Kirk. “We are going to have to take market share. We’ve done it before, and I think we can do it again. We’ve already had a reasonably good start into the year in terms of new business but of course it’s still early days.”
Sanlam reported a 12% increase in new business volumes to R249 billion in the year to December 2019.
Kirk said while he expects 2020 to be a tough year, Sanlam will still deliver real dividend growth and achieve its targeted growth in shareholder value. Thanks to its presence in 44 countries, the company is not totally dependent on one region, even though South Africa makes up about 60% of its earnings.
“Yes, South Africa is the biggest and South Africa is tough and we are in for a long period of recovery. But if you look at the story of Sanlam in 2011, 2018 and 2019, you’ll see that in the tough times, we just continued to deliver on our targets because our people just put their heads down, they don’t get distracted and we grow by taking market share in South Africa and we’ll continue doing so,” said Kirk.
He said keeping the brand away from scandals and negative publicity has helped the company get more brokers and financial advisers to sell its products.
“If you start doing unfortunate stuff, it makes life very, very difficult for the agents. I travel around the country and the agents say 'thank you for not making our lives difficult',” said Kirk.
For the 2019 financial year, Sanlam has declared a final cash dividend of 334 cents per share, an increase of 7.1% from 2018.
