Operational update for the four-month period ended 30 April 2022
(Incorporated in the Republic of South Africa)
Registration number 1959/001562/06
JSE and A2X share code: SLM
NSX share code: SLA
(“Sanlam” or “the Group”)
Operational update for the four-month period ended 30 April 2022
The Sanlam Group recorded a satisfactory performance for the first four months of 2022, in which we saw
global supply chains disrupted, global financial markets decline in the face of the Russian invasion of Ukraine,
inflation surge globally and KwaZulu-Natal, South Africa, experience catastrophic flooding. The Group posted
creditable earnings, with strong results in the life insurance and investment management businesses
offsetting weak general insurance and credit results. Despite the volatility experienced in global equity and
credit markets, the South African equity market performed comparatively better due to a substantial increase
in commodity prices. Although life insurance recorded much lower COVID-19 excess mortality claims,
Santam was impacted severely by a number of weather and fire-related events in the first quarter of the year,
as well as the major weather-catastrophe in KwaZulu-Natal in April. The Group’s operations remain robust,
with a strong capital position and further growth in life insurance new business volumes despite the high 2021
base and satisfactory growth in general insurance new business volumes.
The Group remains focused on the diligent execution of our purpose-led strategy. We have significantly
strengthened our business through the agreement to combine our Pan-African operations outside of South
Africa with those of Allianz SE, subject to regulatory and other approvals. This partnership will further support
our objectives of creating shared value and driving financial inclusion across the continent.
We completed the package of transactions that finalises our partial exit from the UK, with only a focused
international asset management business remaining. The acquisition of the Alexforbes retail and group life
businesses was also completed in the period.
Given the continuing uncertainty around the development of the COVID-19 pandemic as well as continuous
economic and financial market pressures, Group believes it prudent to maintain a higher than usual level of
discretionary capital to provide a buffer against any significant weakening in mortality experience and
financial markets. Discretionary capital increased from R2,9 billion on 31 December 2021, to some R6,5
billion on 30 April 2022; including proceeds of £153 million from the UK asset sales.
Key performance indicators*^
Earnings impacted by catastrophe events and market volatility
- Net result from financial services decreased by 7%, largely due to the catastrophe events at Santam
and the impact of market volatility on credit spread earnings as well as SEM’s general insurance float
returns. Net result from financial services would be 8% higher excluding the impact of one-off items.
New business volumes remain robust
- Life Insurance new business volumes increased by 8% (excluding UK businesses sold) and
Investment new business volumes declined by 8%, both off high 2021 bases. General Insurance new
business volumes increased by 4% (7% excluding reinstatement premiums at Santam), with SPA GI
increasing 10% in constant currency.
- Net value of new covered business (VNB) was down by 16% (down 8% on a constant economic
basis), largely due to the impact of product mix changes, with lower sales of risk and guaranteed annuity
products in SA Retail Affluent. However, SEM life operations continued their strong profitable growth. A
net VNB margin of 2.34% was achieved, below the 2.82% recorded in 2021.
- Group net client cash inflows of R26,7 billion were down 5%, in line with expected lower investment
flows in SEM and SIG, off high 2021 bases.
Strong capital position
- Group solvency ratio remains strong at 171% on 31 March 2022**, within target range.
*All commentary relates to the first four months of 2022 relative to the first four months of 2021, unless otherwise indicated
^ Currency movements did not have a significant impact on the percentages quoted
Four months ended
Four months ended 30 April 2022
Net result from financial services 30 April 2022 (constant currency)
Group (7%) (7%)
Life Insurance 14% 15%
General Insurance (62%) (61%)
Investment Management 18% 16%
Credit and structuring (10%) (10%)
Life and Savings 21% 21%
Sanlam Emerging Markets (4%) (3%)
Sanlam Investment Group (17%) (18%)
The key drivers of the net result from financial services performance are:
• Life insurance earnings recorded strong growth due to lower COVID-19 related excess mortality
claims, which were fully covered by product pricing.
• Investment management earnings increased, driven by higher average assets under
management from strong net inflows and market gains in 2021, as well as improved performance
fees and fund establishment fees.
• However, these were more than offset by:
o A decline in General insurance earnings, largely attributable to the catastrophe claims at
Santam and lower investment return on insurance funds at SPA GI. SPA GI achieved an
underwriting margin within its target range, albeit lower than the comparable period in 2021.
o Credit and structuring earnings decreased largely due to the impact of exceptional 2021
equity market returns on equity-linked financing structures in SanFin.
Net result from financial services would be 8% higher excluding the impacts of excess mortality
experience (including discretionary reserve releases and repricing), higher new business strain, widening
credit spreads, UK assets sold, KwaZulu-Natal floods, and market volatility on SPA GI investment return
on insurance funds and Glacier participating portfolios, in the current and comparable periods.
The decrease in net result from financial services was further impacted by lower investment return due to
weaker investment market performance over the period relative to 2021. Project expenses were higher
largely due to the corporate activity across the Group in execution of the Group’s strategy. These items
resulted in Net operational earnings decreasing by 24%.
Headline earnings and diluted headline earnings decreased by 31%, the combined effect of the 24%
decline in net operational earnings and the impact of the movement in the Sanlam share price on treasury
shares held in policyholder portfolios.
LINE OF BUSINESS ANALYSIS
Life insurance net result from financial services increased 14% driven by a strong improvement in Sanlam
Life and Savings (SLS) earnings.
SLS life insurance net result from financial services increased 22%, driven by better mortality experience
(over and above 2021 discretionary reserve releases) compared to the first four months of 2021. The
cluster also benefited from increased asset-based fee income due to higher average assets under
management. These items more than offset higher new business strain and a decline in Glacier earnings
from lower annuity longevity profits as well as income earned from products where Glacier participates in
the actual investment return earned on the underlying portfolio.
SEM life insurance net result from financial services increased by 2% in constant currency (4% lower at
actual exchange rates). Improved claims experience in the Southern Africa region and better results in
Nigeria due to good investment performance supported the results. These were partly offset by lower
earnings in Morocco due to relatively weaker investment market returns. The impact of COVID-19 on
mortality experience is limited.
SIG detracted from overall life insurance earnings growth, recording a 64% decrease in net result from
financial services (excluding the UK life business). This is substantially due to the impact of credit spread
movements on offshore bonds in the central credit management business in SanFin, as well as higher
New business volumes and net client cash flows
Life insurance new business volumes were up 8% (excluding UK business sold), with SLS and SEM both
Four months 30 April 2022
Life insurance new business volumes 30 April 2022 currency)
New business volumes
Retail Mass 14% 14%
Retail Affluent (4%) (4%)
Single Premiums (4%) (4%)
Recurring Premiums 3% 3%
Corporate >100% >100%
Single Premiums >100% >100%
Recurring Premiums (31%) (31%)
SPA Life 2% 5%
India (16%) (15%)
Malaysia 92% 94%
SLS 8% 8%
SEM 8% 10%
Net present value of new business premiums
Retail Mass 18% 18%
Retail Affluent (4%) (4%)
Corporate 65% 65%
SPA Life 7% 10%
India (13%) (13%)
Malaysia 28% 29%
SLS 6% 6%
SEM 6% 9%
Increased volumes in SLS were driven by the SA Retail Mass and Sanlam Corporate businesses.
Strong growth in Retail Mass new business sales was driven by the individual life business recording
growth of 27%, supported by further improvements in agent productivity. Capitec Bank JV funeral business
sales increased by 12%, while the group businesses recorded lower sales.
Retail Affluent new business volumes declined largely due to lower risk sales in the agency channels
and, in particular, lower sales of guaranteed annuities as the number of early retirals reduced in South
Africa and competitors raised annuity rates. Recurring savings business showed good growth.
Corporate’s new business volumes more than doubled due to strong growth in single premium inflows
into annuity and guaranteed products.
SEM life insurance new business volume growth was underpinned by good performances from SPA and
SPA life insurance recorded good growth in most regions, with Botswana being the only detractor. India
recorded weaker sales due to a slightly weaker performance from direct channels and a focus on better
quality business. Malaysia continues to benefit from channel diversification.
Life insurance net client cash inflows doubled, largely due to lower mortality claim payments in SLS,
improved inflows on savings business and persistency being maintained at satisfactory levels.
Value of new business
Net VNB decreased by 16% (down 8% on a constant economic basis). SLS VNB was 22% lower (down
11% on a constant economic basis), with Retail Affluent and Corporate decreasing largely due to mix
changes to lower margin products. Retail Mass VNB increased 12% (30% on a constant economic basis),
reflecting continued strong high margin volume growth.
SEM VNB increased by 12%, with strong improvements reported across the portfolio due to higher
volumes, except for Botswana.
The Group covered business net VNB margin of 2.34% (2.55% on a constant economic basis) was lower
than the 2.82% recorded in 2021 due to the product mix changes in South Africa. SLS recorded a margin
of 2.09% (2.36% on a constant economic basis) (2021: 2.85%) while SEM’s margin improved strongly to
3.66% (3.56% on a constant economic basis) (2021: 3.47%).
General insurance net result from financial services decreased 62% driven by declines in Santam and
SEM general insurance net result from financial services decreased 16%. This is mainly due to weaker
performance from SPA GI, which was significantly impacted by lower investment return on insurance
funds due to the decline in Moroccan equity markets over the period (1.7% decline in the Moroccan All
Share index compared to a positive return of 4.6% in 2021). SPA GI recorded an underwriting margin at
the lower end of the 5% to 9% target range, while the investment return on insurance funds was slightly
below the target range of 6% to 9%. Higher claims experience on motor and health business in some
operations and weaker performance from certain of the East African businesses detracted from results.
India’s net result increased by 26% mainly due to improved claims experience and investment returns.
Santam recorded a weaker performance largely due to the significant weather-related catastrophe events
experienced in the first four months of 2022. Float returns were also impacted adversely by market
New business volumes
General insurance new business volumes increased 4% (7% excluding reinstatement premiums at
SEM general insurance new business volumes (net earned premiums) increased by 4% (7% in constant
currency). SPA GI increased by 7% (10% in constant currency) due to good growth in motor business
which was partly offset by lower volumes in the health and assistance businesses. In India, Shriram
General Insurance (SGI) was impacted by lower sales through Shriram channels. Prescribed third-party
premium increases in India have been approved from 1 June 2022. Although the increase is lower than
the historical average, it will bring some relief to SGI‘s third-party portfolio.
In April 2022, leading global investment firm KKR acquired a 9.99% shareholding in SGI from Shriram
Capital Limited. Sanlam was supportive of the KKR transaction. Sanlam’s direct interest in SGI remained
unchanged and its total effective economic interest reduced by 2.6% to 40.3%.
Santam achieved satisfactory gross written premium growth of 7% in the Conventional Insurance
business, with strong growth at Santam Re partially offset by a decline in the Specialist business. Growth
in net earned premiums was impacted by reinsurance reinstatement premiums due to the impact of
catastrophe events over the period.
Investment management earnings increased 18%, with good growth recorded in both the SEM and SIG
SEM net result from financial services from the investment management portfolio increased 24% due to
higher fee income as a result of increased assets under management, driven by strong net fund inflows in
Southern and East Africa in 2021.
SIG net result from financial services increased 17% driven by improved performances from the Sanlam
Investments and Wealth Management businesses.
Sanlam Investments (third-party investment manager) net result increased by 70% (up 32% excluding the
effect of once-off tax adjustments), with all underlying businesses performing well due to higher assets
under management. This was further augmented by performance fees in the third-party asset manager
and fund closure fees in the Alternatives business.
Wealth Management benefitted from strong brokerage income from improved retail and institutional
The International business was down 5% (excluding Nucleus Financial Group plc) mainly due to the
impact of the decline in equity markets over the period.
Net client cash flows
Investment management recorded net client cash inflows of R11,5 billion, although this was 35% lower
than 2021, reflecting the unusually good experience of 2021.
SLS recorded a strong improvement in investment business net client cash inflows in the Glacier LISP
business, with strong inflows into living annuities.
SEM investment management recorded net client cash outflows over the period, largely due to lower new
business written over the period, reflecting the lumpy nature of flows in this business.
SIG investment management net client cash inflows declined by 32% to R9,4 billion, reflecting the
unusually good experience of 2021. This was mainly due to lower 2022 inflows in Sanlam Investments
where lower inflows at Satrix and Sanlam Multi-Manager more than offset strong inflows in the Alternatives
business. Wealth Management and International net inflows were lower than 2021.
CREDIT AND STRUCTURING
Credit and structuring net result from financial services decreased by 10% largely due to lower structuring
earnings in SIG.
SLS net result from financial services from the credit and structuring business increased by 33% due to
lower bad debt charges in the Sanlam Personal Loans business.
SEM net result from financial services from the credit and structuring businesses is in line with prior year.
SPA credit earnings decreased as good growth in Namibia was more than offset by lower earnings in
Botswana. India increased by 4% due to improved net interest income from increased disbursement and
good levels of collections.
SIG’s net result from financial services from the credit and structuring businesses declined 46% due to
lower earnings in the structuring business in SanFin as a result of exceptional equity market returns on
equity-linked financing structures in 2021.
CAPITAL AND SOLVENCY
Discretionary capital increased from R2,9 billion on 31 December 2021 to some R6,5 billion on 30 April
2022. The increase is largely due to Sanlam’s share of the Santam special dividend of R542 million,
positive investment return on Sanlam Life capital and includes proceeds from the UK asset sales.
The Sanlam Life and Pensions UK Limited transaction closed on 27 April 2022; and the Sanlam Private
Investments UK Limited and Sanlam Wealth Planning Holdings UK Limited transactions closed on 6 May
The Sanlam Group Solvency Capital Requirement (SCR) cover ratio amounted to 171% on 31 March
2022 and Sanlam Life at 213% (Sanlam Life covered business at 177%). Sanlam Group and Sanlam Life
remain well capitalised and well within target SCR ranges.
The operating results for the four-month period include the effects of the ongoing conflict in Ukraine and its
consequent impact on investment markets, inflation and interest rates, as well as the impact of the KZN
floods. The Group has negligible direct exposure to financial instruments directly related to Russia and
Ukraine. However, consumers are likely to face increased financial pressure from higher food and
transport inflation, as well as higher short term interest rates. This is likely to result in lower savings rates
and higher persistency risk as personal disposable income comes under pressure. The Group is most
concerned about the impact of the economy on people’s living standards.
The Group expects new business growth rates to be muted over the remainder of the year. The resilience
of the South African and broader Pan-African economies, especially those that benefit from higher
commodity prices, should however provide some support. The Group will continue to manage its cost base
in a disciplined manner.
The impact on mortality rates from the Omicron variant of COVID-19 has thus far been much less severe
than previous variants. It, however, remains difficult to accurately forecast the timing and severity of future
waves. Management actions implemented in 2021, including risk-based repricing and strengthening of the
mortality basis, are expected to largely address the higher mortality resulting from further waves of
COVID-19, based on our base case assumptions.
Despite the continued overall prudence in the Group’s reserving basis, higher than usual discretionary
capital is being maintained to mitigate mortality losses in excess of the management actions outlined
above. Given the continuing uncertainty around the development of the COVID-19 pandemic as well as
the current economic and financial market pressures, the Group believes it prudent to maintain a higher
than usual level of discretionary capital to provide a buffer against any significant weakening in mortality
experience and financial markets volatility.
The Group is cognisant of the lower returns earned by holding increased levels of discretionary capital and
continues to balance the need for prudence in a volatile environment, with its overall return and growth
ambitions. A higher level of discretionary capital also allows the Group to consider further strategic
opportunities in line with our growth strategy and capital allocation framework.
The Group’s general insurance operations are also implementing management actions, including risk
reviews and rate increases in line with global reinsurance rate hardening.
The overall capital strength of Sanlam, our diversified portfolio; and track record of execution, remain key
differentiators. The Group remains well positioned and aims to continue to deliver long-term value to all
stakeholders as we implement our purpose-led strategy, despite the difficult operating environment that is
likely to persist for the remainder of 2022.
The information in this operational update has not been reviewed and reported on by Sanlam's external auditors. Shareholders
are advised that this is not a trading statement as per paragraph 3.4(b) of the JSE Limited Listings Requirements.
The constant currency information included in this review has been presented to illustrate the impact of changes in the exchange rate of South
African rand against other currencies and is the responsibility of the Group’s Board of directors. It is presented for illustrative purposes only and
because of its nature may not fairly present the Group’s financial position, changes in equity, result of operations or cash flows. All references to
constant currency information are based on the translation of foreign currency results for the four months to 30 April 2022 at the weighted average
exchange rate for the prior period, which is also applied for the translation of comparative information.
The major currencies contributing to the exchange rate movements are the British pound, Botswana pula, Indian rupee, Angolan kwanza, Nigerian
naira and the Moroccan dirham:
Foreign currency: ZAR Average four months Average four months (Strengthening)/
to 30 April 2022 to 30 April 2021 Weakening
United Kingdom 20.18 20.46 (1.4%)
India 0.20 0.20 (0.4%)
Angola 0.03 0.02 35.9%
Nigeria 0.04 0.04 (6.0%)
Morocco 1.59 1.66 (4.0%)
Botswana 1.31 1.35 (3.4%)
In respect of the Group’s investment in the former Saham Group, the constant currency information only allows for the impact of the change in
exchange rate between the South African rand and the Moroccan dirham on the consolidated former Saham Group results. No adjustment is
made for exchange rate movements between the Moroccan dirham and the reporting currencies of the former Saham subsidiaries.
Management will host a conference call at 17:00 South African time (UTC+2) on 8 June 2022.
Conference call registration
Those wishing to participate in the conference call should navigate to: https://www.diamondpass.net/4376339
Registered participants will receive their dial-in number upon registration.
Recorded playback will be available until 13 June 2022.
Access code for recorded playback: 42462
South Africa 010 500 4108
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Other Countries +27 10 500 4108
8 June 2022
The Standard Bank of South Africa Limited
Date: 08-06-2022 01:58:00
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