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Sanlam overachieves its FY financial targets

CEO Ian Kirk notes that the Saham deal is the biggest done by the group in 100 years.

NASTASSIA ARENDSE:  Joining me on the line is Ian Kirk, who is the Group CEO at Sanlam. The company published their full-year numbers today. To take us through the financials is the CEO himself. Ian, thanks so much for your time.

IAN KIRK:  Hi, Nastassia.

NASTASSIA ARENDSE:  Take me though the year that was, perhaps encompassing the environment that you are operating in.

IAN KIRK:  It’s funny. We are now looking here at March 2018, and we think life is so much easier. But we have to look back – 2017 was tough, very tough. On our side, negative impact. It was the discretionary spend and it was a tough road for the single-premium business.

I think as far as South Africa is concerned, we had a very good outcome. We had a very solid result in the last two months. We gave an operating update at the end of October, and we hadn’t quite achieved what we achieved at the end of the year. On top of that, in December we had that Steinhoff experience in the market, which you are aware of. So overall I think a very good set of results. We are pleased. We recovered well.

Of course South Africa is in a very different place from a confidence point of view. We still have to deliver a heck of a lot; there’s a heck of a lot fixing to do. But certainly the sentiment is looking a little bit better and that obviously looks better for a group like Sanlam.

NASTASSIA ARENDSE:  Let’s touch a little on the highlights and the lowlights. You spoke about Steinhoff, which I assume is one of the lowlights. Anything else you can mention? How is the turnaround going at Sanlam UK, and perhaps even in Kenya and Malaysia?

IAN KIRK:  Obviously we overachieved on the financial targets. But, behind that, as you say, is the turnaround in the UK. That’s really a support activity for us, for our main activity is in South Africa and in Africa – it’s not that we try and take on the UK businesses. So we were very pleased. For a number of years we’ve not really achieved on the UK side the hurdles that we set ourselves. We did this year, so well done to Jonathan Polin and the team. That was nice. So we are much better positioned now.

The other thing is we had much stronger institutional inflows into Sanlam Investments. Robert Roux and the team there have done some good work on repositioning the third-party asset management business.

India had a great turnaround. We were up over 40% there, and that’s tremendous. Our partner in the business there in India is in good shape and they did the right things that altered the demonetisation.

Santam had a very good performance in a year that was characterised by two major catastrophic events. The one you will remember in June was a R3 billion hit for the industry. Santam had an R800 million gross knock there, obviously protected a bit by the reinsurance. And then again a R1.6 billion knock for the industry in October. So for Santam to achieve 6%, which is right bang in the middle of their target underwriting margin, was great.

On the underperformance side you mentioned Malaysia. Kenya remains a work in progress. We didn’t achieve what we should have there. Botswana and Namibia were impacted by market conditions, with some competitive pressure in Botswana. Single-premium flows, SPF, as I indicated, in the tough times is down.

And Steinhoff – we had to box very cleverly there on the collateralised lending, so some good work done by our team thereafter, which has really left a position where the shareholders ended up with not a significant knock relative to what we could have had. So a good recovery, I would say, by the team. But Steinhoff was a very unfortunate event which impacts obviously all the investment houses in South Africa.

NASTASSIA ARENDSE:  When it comes to Kenya and Malaysia, when you are sitting down with your team, what from your perspective is within your control in being able to increase the top line and some of the operational earnings on that side?

IAN KIRK:  The issue in Kenya is we really haven’t had the best team on the ground. That’s the reality of the situation. That’s unfortunate, because our business, the life business in particular, is a good business, but it’s not delivered what we should have had. On the general side the business we acquired was not a great business, and it’s just taking us a bit of time turn it around. Kenya is a key part of our strategy. We’ve got to get it right, so Junior Ngulube and his team know what is to be done, and we have a plan. I’m fairly confident we’ll get there. We need to get there.

Malaysia – you must remember, we entered it back in 2012 as part of the strategy to move into that region. When we saw the big opportunity for us on the African continent, we sort of scaled back our aspirations in South-East Asia. So one must see it in that context and we are confident we’ve got a turnaround plan. We are seeing some early progress in the life, but it’ll take us a couple of years to get right. Again, on the general business which we don’t control, it’s an associate. We’ve got work to do there as well.

NASTASSIA ARENDSE:  In terms of prospects, what will you and your team be focusing on?

IAN KIRK:  We have a very diverse business now. We have a business that’s much more dependent upon the African continent and India than it was a few years back. So in South Africa it’s about retaining our strong position where we lead. We know why we are there and we know what we have to do to stay there.

In the segment of the market where don’t lead, we know what the leaders do and what we need to do to try and catch them. That’s very important. We’ve got plans for all of that. I think, as I indicated earlier, the South Africa that we sit in now hopefully will start to recover and some of the political influence will start feeding through to our economic environment if we start doing the right things as opposed to the wrong things.

I think on the Sanlam side, towards the back end of the second half we should see some respite there.

The transaction we announced, the third phase of Saham, which we announced this morning, is obviously a big thing for us. It’s the biggest deal we’ve done in Sanlam in 100 years, and it’s a very, very important  strategic transaction for us. It puts us in a really unrivalled position on the continent. And now we need to deliver on that. That’s really what we’ve got our heads down on. Our strategy is certainly solid. We’ve had it in place now for a number of years. We are executing well on it, and I guess it’s really more of the same and we’ve a big focus on taking control of Saham, which will take place in the third quarter of this year.

Read: Sanlam’s $1 billion deal is largest African insurance transaction

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