Returning to its pre-pandemic profit level, the South African insurance giant confirms its continental appetite.

In 2021, Sanlam has given itself the means to pursue its ambition: to strengthen its footprint on the entire African continent. Despite a surge in excess mortality linked to Covid-19 (claims valued at 4.2 billion rand, or approximately 232.4 million euros as of December 31), the South African giant ended the year with solid performance, “a year ahead” of projections.

We have created a special pandemic reserve

Its turnover reached 200 billion rand last year (compared to 133 billion in 2020). This is its highest level since the takeover in 2018 of Moroccan Saham, its first rival on the continent (after its South African colleagues). The operation had swung the revenues of the colossus of Cape Town solidly above the bar of 100 billion rand, which it happened to graze only intermittently before. Thus, with a profit of 11.35 billion rand (628 million euros as of December 31), the number 1 African insurance company is regaining its form before the Covid-19 crisis, which had lowered this indicator to only 1.4 billion rand. Shareholders can be all the more satisfied as the net income group share is 9.47 billion rand, i.e. 13 times that of 2020.

Overhaul of the pricing policy and reserves

Listing the main indicators that have contributed to these results, Paul Hanratty, the group’s CEO since 2020, detailed the reasons for such a performance on March 11. After a difficult year 2020 for the insurer’s activity due to the strict containment measures in force, “the group has worked to restore the level of operating results to their pre-pandemic level in 2021”, a-t-t he announced during a presentation to investors.

For good reason, Sanlam has begun a complete overhaul of its price structures and products. “We have also created a ‘pandemic special reserve’ applicable to retail life insurance and released certain historical reserves which, on the contrary, are no longer suitable for our business,” said Paul Hanratty.

The reallocation of reserves has in particular made it possible to offset losses linked to the high level of mortality in 2021 and should lead to future losses due to the pandemic being limited.

Moroccan correction

Outside the borders of its “fortress market” in South Africa, Sanlam has simultaneously relaunched its ambitious program to consolidate and strengthen its positions. In particular, and with regard to its main acquisition in recent years, Saham Finances Group, 2021 was an opportunity to close the “acquisition impairment” file.

Indeed, in 2020, Sanlam had to provision nearly 8 billion rand in impairment charges, mainly related to the acquisition in 2018 of the Moroccan flagship founded by Moulay Hafid Elalamy, the operation resulting in an amputation of more than a third South African’s operating profit in the first half of 2020. A reassessment of this impairment was carried out by the group as of December 31, 2021 and finally, according to Sanlam’s calculations, “the value in use [qui donne une estimation de la valeur de marché de Saham Finances, ndlr] is greater than the carrying amount and therefore no further impairment is required”.

Target of 50 million customers by 2025

The activity of the former Moroccan asset, since renamed Sanlam Pan Africa (SPA) Non-Life, was particularly boosted by the strong profitability of its stock market investments last year. However, the net margin on policy subscriptions for this branch (4%) is below the objectives of 5 to 9%, and lower than the result for 2020 (6.1%), due to an unusual level of claims in Ivory Coast, explains Sanlam.

Pan-African expansion

2021 was also marked by the resumption of acquisitions by Sanlam: on the continent, the insurance group thus announced the creation of a strategic alliance in insurtech with MTN. “This agreement is expected to improve financial inclusion for consumers who are currently not reached through traditional distribution channels, and help Sanlam reach its goal of 50 million customers by 2025. [contre environ 10 millions de clients aujourd’hui] “said Paul Hanratty. The leading African telecoms group, MTN has more than 270 million subscribers worldwide.

In addition, the South African insurer has entered into a share buyback agreement (with a long-term deadline of December 31, 2021, and an extension to March 31, 2022) to sell all shares held in Sanlam Guinea, Sanlam Congo, Sanlam Gabon Vie and Sanlam Togo Vie to NSIA and to acquire all the shares held by NSIA in NSIA Vie Mali and NSIA Mali. This cross transaction is both subject to the actual completion of the operations before the end of March, and to regulatory approvals from the CEMAC and South African authorities.

In terms of outlook, Sanlam will continue to explore options aimed at “optimizing (our) pan-African portfolio by strengthening our position in key markets and abandoning smaller operations”, punctuated the CEO of Sanlam. A strategic agreement between insurance heavyweights is under discussion with Allianz. Details on this transaction, followed with great attention on the African markets, are expected in the coming weeks.