CFO Abigail Mukhuba says Sanlam on strong growth trajectory

post-title

Despite macro-economic challenges and volatile market conditions, Sanlam’s solvency has remained strong.

This year was off to a promising start for Sanlam as insurance claims started returning to pre-Covid-19 levels. However, the Russia-Ukraine conflict further disrupted global supply chains and energy markets.

Sanlam CFO Abigail Mukhuba explains that the subsequent inflation surges, central bank responses on interest rates, a huge global stock market correction and the widening of credit spreads have created a new and dangerous macro environment. “Surging inflation has put consumers under pressure and eroded the savings rate dramatically,” she says, adding that this has affected persistence amongst lower income customers.

In addition to this, Santam experienced its second biggest ever catastrophe in the form of severe flooding in KwaZulu-Natal. “This, coupled with an equity market fall in Morocco, meant that general insurance earnings were down by 57 percent on the previous year, and as a result, overall group earnings were up just one percent,” she explains.

Despite these challenges, Abigail is proud of the quality of Sanlam’s earnings, which speaks to its sustainable 104 years in business. “Despite the difficult and challenging macro environment over the past few months, the group managed to grow earnings from life insurance operations by 23 percent, earnings from asset management by 25 percent and earnings from credit operations by 22 percent,” she says.

On the bright side
Abigail says that the group’s solvency has remained strong, leverage is extremely low and there is a high level of discretionary capital, which creates significant strategic flexibility for the group.

She explains that: “Mortality profits have returned to pre-Covid-19 levels, which has helped life insurance operations. The asset management business has been helped by strong client cash flows as a result of a strong competitive position, by strong performance fees, fees on the closing of new funds raised in the alternatives space and strong brokerage in the wealth management business. The credit operations earnings have been helped by a strong turnaround in India where book growth and improved collections are in line with the improved economic environment in India.”

As a result, the group has reported a 20 percent improvement in its life insurance, investment management and credit operations profits.

Abigail adds that, overall, the group is well positioned with sales and net client cash flow (NCCF) is holding up well. “It must be remembered that 2021 sales and NCCF were outstanding, fuelled by an unusually high savings rate.”

She says that, with Covid-19 impacts beginning to reduce and the structure of Sanlam’s assets, the group is likely to perform very well in a world of higher inflation and interest rates. “Although the rise of inflation and interest rates impacts negatively in the short run, customers are likely to review cover upwards as inflationary wage increases come through.”

Further growth
Abigail explains that Sanlam’s strategic progress has been pleasing, with its asset management business developing strongly following the creation of South Africa’s largest black asset manager. “I expect the merger of the Absa asset management business to create considerable operating efficiencies in due course, given the scale of the asset.”

She says the group’s Glacier platform will also be considerably scaled up as a result of the two LISP acquisitions, and the group risk insurance business is now a market leader with profits rebounding as a result of pricing changes.

“The group’s corporate business is focusing strongly on our Sanlam umbrella fund growth following the sale to Alexander Forbes of the standalone administration business, and we’re delighted with the restructuring of the Shriram group and the approval by shareholders of the merger of the two listed credit businesses,” Abigail adds. “We expect significant synergies to flow from this.”

The group is also busy trying to secure the large number of regulatory approvals required to implement the Pan-African JV.

Related articles

Three CFOs’ guide to managing boardroom expectations

Productivity SA CFO Okuhle Sidumane, Sappi Southern Africa CFO Pramy Moodley and BMI Coverland FD Tammy Narain explain how effective expectation management helps them ensure every engagement with their board is a success.

Top