African Insurer Sanlam Sees Sales Growth Slowing on Virus
(Bloomberg) -- Sanlam Ltd. said growth in new business volumes will probably taper off toward the end of the year as rising unemployment and a deteriorating South African economy weigh on the continent’s largest insurer.
- Net operational earnings fell 39% in the six months through June to 3.51 billion rand ($211 million), the Cape Town-based financial services company said in a statement on Thursday. New business volumes rose 40% in the period, while net fund flows increased by 44%, it said.
- “The impact of Covid-19 on claims and persistency experience in our life businesses was muted” in the first half, Sanlam said. “But this situation is expected to deteriorate in the second half of 2020” as already evident in the weakening claims experience since the end of June.
- Profit declined due to lower investment-related income in some units and increased provisioning to cover doubtful debts in Sanlam’s specialized-finance business.
- Sanlam also supported its property and casualty subsidiary to pay almost 1 billion rand in relief to clients whose businesses were interrupted by a lockdown to curb the spread of Covid-19. Insurers are awaiting the outcome of a court case brought by customers after business-interruption claims were rejected.
- The 102-year-old insurer has revamped its South African operations to create a new life and savings cluster, which will include its offerings aimed at the mass market, the affluent segment and its corporate division.
- The reorganization was ushered in by new Chief Executive Officer Paul Hanratty, who took over from Ian Kirk in July, and follows an acquisition drive that placed Sanlam in 33 African countries and 12 others from the U.S. to India.
- “My expectation is that things will gradually improve,” Hanratty said by phone. “It is going to take a very long time for the African and South African economies to get back to where they were” before the onset of the virus.
- “I would imagine it could be two to three years of a slow grind to recover,” he said.
- Sanlam pays an annual dividend from earnings and has not altered its policy. It’s too early to give further guidance on its dividend, Hanratty said.
- Shares in Sanlam slumped 2.4% as of 9:09 a.m. in Johannesburg, the worst performer in the five-member FTSE/JSE Africa Life Assurance Index.
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