FIFI PETERS: Sanlam has become the latest South African company to reduce its exposure to the UK and come home, following the footsteps of Old Mutual, Absa and Netcare – some of the companies that have come to mind in the recent past. But Africa’s largest insurer also released its results a little earlier today, showing a record in claims for 2020/2021 of a R22 billion.
We do have Abigail Mukhuba, who is the Sanlam CFO on the show with us. Abigail, thanks so much for your time. Can you tell us exactly what the Covid-19 situation is on your books, based on the data that you have?
ABIGAIL MUKHUBA: Good evening, Fifi, and thank you to you and your listeners. The R22 billion that you talked about in terms of the claims that have been paid out is cumulative from the beginning of 2020 until June 2021. Of that R22 billion, we paid out R17.5 billion in South Africa alone, and R5 billion in the rest of our emerging markets.
FIFI PETERS: I suppose that makes sense, given that we do have the highest number of recorded Covid-19 cases in South Africa compared to other parts of the continent. But the R17 billion or so that was paid, was that all related to Covid-19?
ABIGAIL MUKHUBA: That is total mortality claims that have been paid out. Unfortunately in South Africa it’s not mandatory to enter as a cause of death that it was related to Covid, so we’ve got data in terms of mortality in totality, not necessarily Covid-specific.
However, if you look at our gross monthly mortality claims, you can see that they continue to track the national trend as far as the Covid deaths that are being recorded. You see the spikes in wave one, wave two, and now wave three as well. Our internal monthly mortality claims were also tracking that trend. So one would believe that R22 billion is definitely impacted by Covid as well.
FIFI PETERS: Would you say that your numbers reflect the full extent of the third wave, which in some people’s books is still going on?
ABIGAIL MUKHUBA: They definitely have not because our numbers are reported up to June, 2021. If you look at the third wave in South Africa, it started towards the end of June, and the majority of it was in July and August. In a way it’s still tapering off, so one wouldn’t say that we are scot-free yet. So the impact of the third wave is not included really in the numbers that we presented today. We will expect to see that in our second-half result.
FIFI PETERS: For most people the pandemic did cause them to stop and rethink and refocus, as it were, on what was important. It looks like in Sanlam’s case, a part of the businesses in the UK are no longer important to your strategy. Just tell us a bit about that and why.
ABIGAIL MUKHUBA: Last year in August/September our board in its strategy session visited where Sanlam is as a group, and where we want to focus over the next five years. One of the areas that we wanted to focus on was primarily South Africa, where we would spend about 60% of our time; the rest of Africa, where we would spend about 20% of our time; and then India as well, the remainder being India. As you can see, we’re looking more towards working with emerging markets.
And then in the UK the strategy is that we will maintain for now the asset-management business, but we will divest of other non-core operations.
FIFI PETERS: It’s quite interesting what you are doing, because we’re seeing a number of South African companies actually pulling out of the continent. Here you are today, as Sanlam, saying that it is a focus and that you might even be going further there. So can you just tell us about the opportunity that you are seeing in the rest of the continent and your plans?
ABIGAIL MUKHUBA: If one looks at the rest of the continent beyond the Limpopo River, you see significant growth opportunities. The GDP projections of all these countries are quite high over the short to long term. Yes, we’ve had the blip of Covid in this year or last year, and nobody really knows when all the vaccinations will lead to herd immunity across the continent. But, having said that, there are growth opportunities across a lot of untapped markets in Africa.
We’ve always been in many countries in Africa. We are in over 50 countries in Africa, but we believe that through a partnership model in each country where we operate we generally partner with a local partner to make sure that we are investing and invested in the country. It’s important for us to ensure that on the African continent we improve and increase our financial inclusivity of the African person. That’s why we’re driven to invest more in the African continent.
FIFI PETERS: Is Ethiopia still on your radar?
ABIGAIL MUKHUBA: Ethiopia is on the radar, but not more from an immediate investment. When we look at different countries it always does come up on the radar, but we have no immediate plans for immediate investment in Ethiopia at this stage.
FIFI PETERS: Is that potentially impacted by some of the geopolitics or perhaps not even geopolitics, the conflict of the tensions that are happening in some parts of that country?
ABIGAIL MUKHUBA: Not necessarily. It also involves a lot in terms of the strategy when we sit in to say which countries we want to focus on, because you also don’t want to do every country all at once. At this stage we’ve been primarily focused on countries like Morocco, Côte d’Ivoire, Ghana and Nigeria. So it’s not really to say because of the political environment; it’s just, I suppose from our side, timing and also commercial reasons in terms of return on investment on opportunities in that country.
FIFI PETERS: Abigail, Sanlam recently announced a new partnership with MTN in the Insuretech space. Can you give us a bit more detail on exactly what this means for your customers?
ABIGAIL MUKHUBA: We talk about wanting to reach 50 million customers by the end of 2025. To do that we’re going to need to have partnerships to ensure that all growth opportunities are taken up, and we need to make sure that we gain access to unpenetrated market segments across the continent. If you look at MTN, like us, they have a very good footprint on the different countries in Africa – and what better partner to partner with than somebody who already has a layout in Africa? They have a need that we meet, and we have a need that they meet in terms of providing financial inclusion for the unpenetrated markets. It was our view that using new technology, in as far as Insuretech Alliance, would be the best way to then penetrate those markets, and potentially the most efficient way to make sure that we’ve got products that are affordable and accessible to the target market.
FIFI PETERS: Just a quick one, Abigail. What will your stance be as a company towards individuals who are vaccinated and those who choose not to get a vaccine – from a premiums perspective?
ABIGAIL MUKHUBA: From a premiums perspective we will continue to follow a risk-based approach when we’re doing any underwriting. We will consider vaccination status, particularly as it involves somebody’s medical status from a co-morbidities perspective. We always have to consider all the risk factors, and sometimes one of the risk factors you would look at would say we will look at body mass index as a good indicator of how likely you are to catch an infection. So in this case, for purposes of determining premiums, we would then look at it on a risk-based approach. We will follow proper underwriting standards to make sure that we’ve got fair and appropriate premium pricing for all our clients.
FIFI PETERS: All right. Abigail, thanks so much for your time. We’ll leave it there. Abigail Mukhuba is the CFO of Sanlam.
I mean, if you just listen to what a lot of these insurance companies are suggesting, this risk-based approach – particularly when it does come to the vaccine – does seem as though those who are not vaccinated will be deemed a lot riskier, just as, for instance, smokers or people who are deemed to be high risk in other avenues. So you might expect to possibly pay more premium. The choice is yours – but it may come at a cost.