Net Result from Financial Services
Sanlam Personal Finance (SPF) grew net result from financial services (operating profit) by 6%. Excluding higher new business strain emanating from the strong new business growth at Sanlam Sky, BrightRock, Sanlam Indie and MiWayLife, net result from financial services increased by 10%. Growth in the size of the Sanlam Sky in-force book over the past number of years and higher investment fees at Glacier supported SPF’s growth in 2019.
Sanlam Emerging Markets (SEM) grew net result from financial services by 29%. The Saham acquisition concluded in 2018 had a positive structural impact on the 2019 earnings. The Indian operations delivered a stellar performance, supported by particularly strong growth at Shriram General Insurance. Across Africa, the life insurance businesses achieved good growth of 11% in net result from financial services. However, adverse claims experience suppressed the African general insurance underwriting margin to 2%, below the target range of 5% to 9%. A few large one-off claims, continued pressure on the Moroccan motor book and high claims inflation in Angola following the significant weakening in the Kwanza, were the main factors driving the underperformance. Investment return on insurance funds exceeded expectations and countered some of the negative claims experience.
Sanlam Investments Group’s (SIG) net result from financial services declined by 7%. All major businesses delivered satisfactory growth, except the UK wealth and advice businesses, which were impacted by pressure on advice fees and a number of one-off project related expenses. SIG’s third-party asset manager’s gross result from financial services increased by 42%, a stellar performance under difficult conditions. The investment team had a good year, with more than 85% of portfolios exceeding benchmarks, contributing to an increase in performance fees from R17 million in 2018 to R71 million in 2019. The strategic focus on alternative asset classes also contributed considerable earnings in 2019. Wealth Management’s gross result from financial services increased by 9%. Fee income rose by some 10%, attributable to net inflows in the prior year and a favourable change in mix of business. Sanlam Specialised Finance did well to deliver growth of 3% in gross result from financial services despite an increase in credit-related provisioning in the current challenging operating environment for corporates in South Africa.
Santam’s net result from financial services increased by 2%. A very good performance given 2018’s 9.2% underwriting margin. The 2018 favourable claims experience did not persist in the first half of 2019, contributing to a decline in the underwriting margin for conventional business to 7.7%, however this remains at the upper end of the 4% to 8% target range.
Sanlam Corporate’s net result from financial services increased by 2%, a considerable improvement since the first half of 2019 when underwriting results were under pressure. Gross result from financial services increased by 3%. Group risk profit doubled to R210 million in 2019. Good traction in the conversion of standalone funds to the Sanlam Umbrella Fund benefitted the earnings of the administration, advice and investment units. The cluster’s inflation linked annuity portfolio earnings were transferred to SIG in 2019 and certain health operations were sold to Afrocentric in 2018. On a comparable basis gross result from financial services increased by a credible 14%.