Sanlam likely third major life insurer to record profit declines
FIN24.COM / 06 MARCH 2020 - 19.49 / LONDIWE BUTHELEZI
South Africa’s biggest life insurer, Sanlam, has warned shareholders that its different measures of profitability for 2019 are expected to fall significantly when it reports its results on Thursday because of once-off transactions.
The insurer’s earnings per share could fall by as much as 45%, while headline earnings per share which exclude the impact of capital items are expected to decrease by between 15% and 25%.
Sanlam CEO, Ian Kirk
This fall in earnings will make Sanlam the third of the big five life insurers to report a shrink in profits in this results season.
Sanlam's share price fell as much as 5.5% to R63.07 shortly after announcing the news.
Discovery also posted an 11% decline in headline earnings for the six months to December, blaming this on expenditure in new initiatives and high policy lapses in its UK life insurance business, VitalityLife. Old Mutual has also warned that its earnings from its operations will probably fell as much as 5% because of the stuttering local economy.
Liberty and Momentum Metropolitan were the only ones who managed to grow their profits in the face of a stagnant economy. But certain of their operations, like the corporate clusters that offer employee benefits, also faced uphills.
Sanlam said its earnings were solely affected by one-off expenses, including the R1.7 billion spent on the broad-based black economic empowerment (B-BBEE) deal that the company finalised in March 2019. The deal saw Sanlam increase its black ownership to over 18%.
The company said operationally, it actually achieved "satisfactory growth" as net profits from financial services and investment return on its capital portfolios contributed between 8% and 18% growth combined.
Other one-off expenses that affected headline earnings were the first-time consolidation of Saham Finances, the Morrocan insurer that Sanlam took over in 2018 and Nucleus as group subsidiaries. The group said their consolidation contributed an additional R250 million amortisation charge. There were also tax treatments on some of its assets that contributed to the losses.
Sanlam said excluding these items, its headline earnings and earnings attributable to equity holders would have increased by between 10% and 20%, because there was solid underlying operational performance by the group.
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