Sanlam sees analytics boosting Personal Finance business

Following Discovery’s lead in using data to understand customers, Sanlam is getting smarter about the products that it’s developing for individuals by pulling customer data from across its traditionally disjointed business units and investing in analytics capabilities.

“We’re tightening up on the data. We’re very much a federal system, which means up to now they [each business unit] owned the data. Now we’re merging the data and seeing trends and opportunities to be more sophisticated in building the right products for the right segments,” CEO, Ian Kirk told Moneyweb on Thursday.

This will aid in driving further cross-sell across the group – which offers the full gamut of short- and long-term insurance products, investments and medical aid – and ensure that Sanlam Personal Finance (SPF) retains its dominant position in South Africa.

Providing long-term insurance, financial planning and retirement solutions to individuals, SPF contributes 43% to group earnings.

Kirk said Sanlam saw further cross-sell opportunity following the acquisition of an effective 27% stake in Medscheme, which gives the group a strong presence in the healthcare space. “The first of these [synergies] has been realised through the roll-out of the Reality loyalty scheme to medical aid members administered by Medscheme,” Sanlam said.

Reality is effectively Sanlam’s Vitality, offering discounts on gym membership, movie tickets and travel. Sanlam invested R73 million into Reality last year.

Kirk said that data analytics would also be used to service clients in the way they want to be serviced, hinting at robo advice offerings, in addition to traditional face-to-face servicing.

“I don’t think you’re going to get away with less than R100 million over time,” Kirk said of Sanlam’s investment into various data analytics initiatives.

No shift in geographic strategy

Kirk said that Sanlam, unlike some of its financial services peers, was not making any strategic shifts in terms of its geographic expansion plans. “We are going to stay the course. We still think we can be busy even though countries are in trouble,” he said, referring to its businesses in Africa.

For example, in Nigeria, whose economy has been squeezed by persistently low oil prices, Sanlam is now “number two in life insurance” following a brownfields business it built over five years with First Bank of Nigeria, the country’s largest retail bank.

The opportunities in West Africa remained compelling despite challenges faced by these economies, since insurance penetration is so low, Kirk said.

Sanlam Emerging Markets (SEM) is now in 34 countries on the continent, following the acquisition of a 30% stake in Morocco-based Saham Finances, which instantlydoubled the group’s footprint.

Net operating profit in SEM, which represents Sanlam’s businesses in the rest of Africa, India and Malaysia, fell 4% over the period to R1.2 billion.

This was largely a function of Zambia’s challenged business environment and a “once off” charge arising from India-based Shriram Capital, related to delays in infrastructure roll-out and subsequent defaults on loans made by Shriram to contractors.

Sanlam has earmarked R970 million to increase its stake in the Shriram life and general insurance businesses to the regulatory maximum of 49%.

Sanlam CFO, Kobus Möller said a lot of the underperformance on profit was due to “once off” items. “There are 34 countries [in Africa], every now and again one will underperform,” he said.

SEM delivered a 30% return on equity (ROE) under “difficult conditions”, Kirk said.

Sanlam is not planning to grow beyond its wealth and investment management business in the UK, Kirk said, but will work on competing more effectively in the local market and improving the unit’s profitability. “We are not making the returns out of this business that we think we should be,” he said.

Sanlam has R2.3 billion for growth and expansion opportunities, which could be augmented if needed, Kirk noted, adding that there was a pipeline of opportunities exceeding that amount.

For the 12 months to December 2015, Sanlam grew normalised headline earnings 6% to R8.9 billion, reflecting a “satisfactory performance in challenging conditions”, Kirk said.

Sanlam’s share price closed Thursday down 6.19% at R58,70.

A Johannesburg-based analyst who preferred to remain anonymous said the market was currently punishing stocks that missed consensus forecasts on earnings and rewarding those that even slightly beat consensus.

Reversing some of the share-price strength of the past week, Sanlam remains the second most expensive life insurance stock on the exchange and the drop had moved it a bit closer to where it should be, the analyst said.