Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sanlam Ltd (NAM:SLA, Financial) reported a 20% increase in profits on a cash basis per share for the first half of 2024.
- Life new business grew by 14%, and the value of new business increased by 10%.
- The SanlamAllianz joint venture showed strong performance, contributing positively to the group's results.
- The company achieved a return on group equity value well above the hurdle rate, despite currency depreciation in key African markets.
- Sanlam Ltd (NAM:SLA) maintained a strong focus on disciplined capital allocation and efficient capital deployment.
Negative Points
- The financial performance of AfroCentric was disappointing, leading to a write-down in the value of the business.
- Persistency in the retail mass business remains a key focus area, with a small persistency loss reported for the first six months.
- Changes in local regulations in Malaysia resulted in certain expenses being borne by shareholders, leading to a loss in the current year.
- The integration of acquisitions and the execution of various transactions have led to increased project expenses.
- The company faces challenges in turning around underperforming businesses in Angola, Cote d'Ivoire, and Kenya.
Q & A Highlights
Q: What is the outlook for mortality variances in the next 6 to 12 months?
A: (Paul Hanratty, CEO) We expect a slight reduction in mortality experience over the next 6 to 12 months but nothing particularly material. The group risk business's mortality profits depend on market pricing, which has held up well.
Q: How does the ARC FS transaction impact the black shareholding of Sanlam Investments?
A: (David Marshall, Group Executive - Strategy) The transaction has zero impact on the black shareholding of Sanlam Investments.
Q: Do you intend to allocate more capital for acquisitions in India given the insurance operations there are quite small?
A: (Paul Hanratty, CEO) We focus on a unique niche in India, targeting the lower part of the pyramid. We will allocate capital where it makes sense, but we do not aim to be a top three player in India due to the market's size and structure.
Q: How does the valuation of the Namibian business compare with its embedded value?
A: (Paul Hanratty, CEO) The valuation is at appraisal value. The specific comparison to embedded value was not detailed in the call.
Q: Why did project expenses reduce sharply relative to the second half of 2023?
A: (Abigail Mukhuba, CFO) Project expenses reduced due to the transition from initial legal and advisory costs of the SanlamAllianz transaction to integration costs, which are lower as they involve more internal resources.
Q: What is the contribution of the Capitec arrangement to VNB?
A: (Abigail Mukhuba, CFO) Capitec's contribution to VNB at a group level is between 14% to 19% for the first half.
Q: Which bond yield is the 7.5% hurdle rate on RoGEV priced off?
A: (Mlondolozi Mahlangeni, Chief Risk Officer and Chief Actuary) The hurdle rate is based on the nine-year bond yield plus 4%. As of December 31, 2023, this was 11.6%, resulting in a 15.6% annualized hurdle rate.
Q: What is the sustainable RoGEV target range post the bedding down of recent M&A from 2025?
A: (Abigail Mukhuba, CFO) The sustainable RoGEV target varies by region, with higher targets for higher-risk environments like Pan-Africa compared to more established markets like South Africa.
Q: Have group risk premiums reduced, and has pricing impacted the numbers?
A: (Paul Hanratty, CEO) There has been a slight reduction in pricing, but the muted growth in this market area is the primary factor.
Q: Does the option for Allianz to increase its stake in the JV to 49% expire after six months, and what is the likelihood of it being exercised?
A: (Paul Hanratty, CEO) The option does expire after six months. We cannot comment on whether it will be exercised, but it is priced at appraisal value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
