CAPE TOWN – Sanlam said yesterday that economic growth would likely remain weak in the medium term, which would stifle its efforts to grow its local insurance and investment businesses, but growth prospects were more promising in other markets that it operated in.
Its shares fell more than 3 percent yesterday morning immediately after it released weaker-than-expected results for the year to December 31, 2019, but the price regained some ground later and was only 0.16 percent weaker at R77.20 early yesterday afternoon. But the share closed 1.37 percent higher at R78.38 on the JSE yesterday.
Normalised headline earnings per share fell 10percent to 431.7cents after volatile global equity markets cut investment returns and the group was hurt by the weak local economy. Heps was also well short of a 457.7c a share consensus estimate made by five analysts on February 15, this year.
The group net investment return was down 57 percent to R707million. Normalised headline earnings were 8 percent lower at R9.1billion.
The dividend was nonetheless increased 7.6 percent to R3.12 a share - the payout was slightly above the analysts’ consensus dividend forecast of 310.1c a share.
Chief executive Ian Kirk said yesterday that negative investment market returns and higher interest rates in a number of markets had hurt earnings. This was aggravated by weak economic growth locally and in Namibia and currency devaluations in Angola, Nigeria and Zimbabwe.
However “we are satisfied with our performance in the challenging operating environment”, he said.
Substantial growth in the earnings of short-term insurer Santam, and satisfactory growth by Sanlam Emerging Markets and Sanlam Corporate, offset softer contributions from Sanlam Personal Finance and Sanlam Investment Group.
Kirk described the results as “very credible” given the environment that the insurer operated in - “we’d want to be able to do better, but we can only operate with the scale we are and the environment we’re in”, adding that there were areas of solid performance.
Sanlam’s performance was also hampered by rising interest rates in the US, Brexit uncertainties, trade tensions globally and volatile currencies.
There are plans to enter Morocco and Egypt. The emerging markets business benefited from new business growth of 68 percent.