Our opinion on the current state of SANLAM(SLM)Sanlam (SLM) is one of the largest insurance and financial services groups in South Africa. It was established in 1918 and demutualised in 1998, subsequently listing on the JSE and the Namibian Stock Exchange. The company operates in South Africa, the UK, America, Europe, India, Australia, and a range of other African countries. Its product range includes general insurance, life insurance, asset management, banking, credit, health, and bancassurance.
The business has four essential elements:
1. Sanlam Investment Holdings (SIH) - now 25% owned by African Rainbow Capital
2. Sanlam Emerging Markets - which includes its 84.5% interest in Saham
3. Sanlam Personal Finance
4. Santam - in which it owns 61%
Outside of South Africa, Sanlam has operations in 11 other African countries and Malaysia. Saham operates in 33 French-speaking countries with 3,000 staff members across 700 branches, offering a product mix similar to Sanlam's. Sanlam also owns 26% of Shriram, a leading provider of insurance products and financial services in India. Additionally, it acquired 69% of Catalyst Fund Managers, a Cape-based manager of listed property assets, and 100% of an Irish company, CIG Fund Management.
About 50% of Sanlam's profits come from its personal finance operation primarily based in South Africa. Consequently, it is impacted by low levels of consumer spending and the economic recession in the country. Sanlam is 18% black-owned and has initiated a partnership with African Rainbow Capital (ARC) to focus on lower- and middle-income consumers and small companies. Sanlam will provide R2bn of seed capital for this initiative.
On 14th June 2021, the company announced that it had acquired the Alexander Forbes group risk and retail life business for R100m. Furthermore, Sanlam announced that, like Discovery, it would require employees to be vaccinated against COVID-19 from 2022.
In its results for the six months to 30th June 2023, the company reported the net result from financial services up 26% and headline earnings per share (HEPS) up 118%. The company said, "Cash net results from financial services increased by 30%, while net results from financial services increased by 26%. The improved performance was broad-based. Net result from financial services from our general insurance line of business increased by 38%, life insurance by 28% and credit and structuring by 36%."
In an operational update for the nine months to 30th September 2023, the company reported new business volumes up 13% and operational earnings up 35%. The company said, "The solvency position of the group remained strong and within target ranges on 30 September 2023, with a group solvency cover ratio of 170%."
In a trading statement for the year to 31st December 2023, the company estimated that HEPS would increase by between 43% and 53%. The company said, "The higher expected percentage increase in net operational earnings is due to higher investment returns on the shareholder capital portfolio." In an update on the three months to 31st March 2024, the company reported cash flow up 14% and investment returns up 15%.
Sanlam is one of the JSE's foremost blue-chip shares with a history of steady growth over a long period. After recovering somewhat from the fall in markets due to the corona pandemic, it is currently trading on a P:E of 11.86. We consider it to be good value at these levels.
In a joint announcement on 18th June 2024, Sanlam agreed to buy 60% of MultiChoice's insurance business for R1.2bn in cash.
