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Africa’s top insurer refocuses on home base after deal misfires

‘We’re going to focus on South Africa and on fixing the leakages in the African continent.’
Image: Dean Hutton/Bloomberg

Paul Hanratty, the new chief executive officer of Sanlam, is refocusing on the South African insurer’s home market and plugging holes from its largest-ever acquisition to squeeze higher returns out of its businesses.

It’s been two years since the Cape Town-based financial services firm bought Morocco’s Saham Finance for $1.1 billion, extending its reach to 33 countries across Africa and making it the continent’s largest insurer. But a crisis in Lebanon, underwriting practices that didn’t meet Sanlam’s criteria, and an over-reliance on investment returns has seen the purchase fall short of investors’ expectations.

“We’re going to focus on South Africa and on fixing the leakages in the African continent, outside of South Africa, because the growth is there,” Hanratty, 59, who took over in July, said via a video conference. “Ultimately, any company needs a strong home base. You need to be able to finance the growth elsewhere.”

The acquisition of Casablanca-based Saham gave Sanlam a footprint in more African countries than any other financial-services company outside of banking. It was part of a plan to diversify away from South Africa, which accounts for most of its earnings, as the economy struggles a recession, high unemployment and corruption.

Biggest African Insurer Pulls Further Ahead as Rivals Scale Back

Sanlam plans to sell more of its products from life cover to mutual funds to existing customers, emulating rivals such as Discovery, which give discounts to clients using their different offerings. Sanlam is repackaging its product suite and digitising channels, the CEO said.

Close to home

“There’s a lot of opportunity close to home, particularly to deepen the relationship with our customers,” he said.

Sanlam’s units in the rest of Africa need to keep ensuring they’re “writing the right kind of business, not the wrong kind, that we are re-insuring soundly, that we are pricing our products and our risks more appropriately,” he said.

“We bought a business that somebody else owned and it hasn’t had the typical financial controls and disciplines around processes that Sanlam would typically have,” Hanratty said.

Not long after buying Saham, the 102-year-old insurer was forced to write down its operations in Lebanon, which accounted for 10% of the purchase price. It also faced claims from the bomb blast in Beirut in August, and took a knock when the drop in oil prices hit Angola’s economy.

“When I talk about filling the holes in the bucket, I talk about putting in place really strong operational disciplines that get you back to a decent return on capital and a less volatile pattern of earnings,” Hanratty said. “We need to chalk that up for a couple of periods for investors for them to see the thing is rock solid again.”

© 2020 Bloomberg

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It would be interesting to know if the CEO Hanratty was part of this cock up of a deal, because he has just been rewarded with R161 million worth of shares..?

Just had a look at Paul Hanratty’s linked in profile and it says he became CEO in June 2020. There is no indication of what he did before. However if he was part of this little adventure as part of the executive, which destroyed value at Sanlam upwards of 100 million dollars, it would be difficult to explain the R161 million worth of share gift. If he was not part of this ill fated ‘expedition’, here is hoping that those responsible have been made to account…?

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