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Sanlam reported on Thursday (September 10) a big drop in earnings for the six months ending June 2020 as the group struggled through its most challenging period in its history, caused by the global coronavirus pandemic.
“This has been the most incredibly difficult period, probably the most challenging in the group’s more than 100-year history,” he said. Paul Hanratty, CEO of the Financial Services Group.
All of Sanlam’s key markets are experiencing a period of contraction, with a recovery to 2019 levels of economic activity only expected in the medium term, the group said.
Profits
- The net result of financial services decreased by 22%, to R3.9 billion;
- Net operating profit decreased 39%, to R3.51 billion;
- Total diluted earnings per share of 185.8 cents increased 10%;
- New business volumes increased by 40% to R157 billion;
- The net value of new covered businesses decreased 29% to R666 million;
- Net margin of new covered businesses of 2.06% (2.79% in 2019);
- No interim dividend declared in accordance with Group policy;
Net operating profit increased by 18% excluding the impact of Covid-19 on certain components of earnings. Sanlam Personal Finance’s net result of financial services decreased 12%, but increased 2% excluding the impact of Covid-19, and 6% also excluding the previous year’s one-time tax adjustment of R70 million on Sanlam Personal Loans in 2019.
Sanlam’s brokered distribution channels were generally not considered essential services in those countries that imposed lockdowns to prevent the spread of the coronavirus, severely hampering the group’s sales forces that rely on face-to-face interactions with customers, he said.
As a result, life insurance sales were hit the hardest, with monthly sales volumes lagging behind targets by 50-90% across many lines of business in April, May and June 2020.
Digital and direct businesses, such as Sanlam Indie, MiWayLife and Sanlam Direct, and the digital sales tools available for certain retail distribution channels provided some relief, but could not mitigate the markedly lower sales from the other traditional channels, the group said. .
Requests for quotes from new companies at Sanlam Corporate stalled in the second quarter, despite the company being able to support clients remotely during the peak of the South African shutdown.
Sanlam said the operating environment will remain challenging for the remainder of 2020, with the end result of Covid-19 being significant uncertainty.
“The pressure on new business volumes persists as various restrictions on the movement of people remain in place. This is compounded by deteriorating economic conditions and rising unemployment in South Africa, materially eroding disposable personal income and the affordability of Sanlam’s offerings. These conditions also reduce investor confidence in clients, ”he said.
Therefore, growth in new business volumes is expected to slow towards the end of the year.
“Our focus will continue to be strategic execution and utilizing Sanlam’s strong balance sheet to pursue value enhancement opportunities. We have the necessary depth of talent to continue to deliver value to our shareholders and other stakeholders despite the current headwinds, ”said Hanratty.
Read: Explaining 51% of South Africa’s GDP, and a ‘swoosh’ recovery
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