Tough times herald opportunities to grab market share for large companies like Sanlam – and that means snapping up businesses at better prices, said Kirk.
‘Waste not, want not’
“Never waste a good crisis,” Kirk said in his first results interview as CEO of Sanlam yesterday. “When the wind comes into the face, the little guys struggle and you can pick up a lot of market share by doing the right things.
“It does mean you have to be heck of a tight at home. If you’re loose and all over the place, you will get crucified.”
Speaking after the release of half-year results, Kirk said South Africa accounted for 70% of Sanlam’s earnings and the group would continue to invest in its home market – particularly in technology, products and distribution – to retain its leadership position.
“It can’t be a ticking over. In a competitive environment, if you just tick over, the guys will take your breakfast,” he maintained. “This is not just important in South Africa because it is so competitive, but it’s important for [other markets].
“If you’re not strong at home, nobody wants to partner with you.” Kirk said capital and effort will continue to be directed towards accelerating Sanlam’s organic growth strategy in emerging markets – Africa, India and southeast Asia – which collectively account for roughly 20% of earnings.
Sanlam had allocated R2.1 billion to its purchase of a 40% stake in Zimbabwean insurance firm, Masawara Investments Mauritius (MIM); its acquisition of a stake in AfroCentric Healthcare Assets, which owns Medscheme; and increasing its stake in India-based Shriram General Insurance from 26% to 49% in the wake of regulatory changes to caps on foreign direct investment.
Kirk said Sanlam had discretionary capital of R2.5 billion left to support its Pan-African strategy. Lusophone and francophone Africa remained a focus for Sanlam’s dedicated mergers and acquisitions team.
For the six months to June 2015, Sanlam grew operating profit 5% to R3.6 billion as currency and commodity headwinds in its rest of Africa businesses and bad debt write-offs in Shriram Capital’s equipment finance business hurt its bottom line.
Overall, profit from Sanlam Emerging Markets slipped 10% to R562 million. Sanlam has raised a provision of R45 million for the stalled roll-out of the Indian government’s infrastructure programme, leading to the nonpayment of contractors.
Excluding once-off items, core underlying operating earnings grew 11%, which Kirk said was “satisfactory” off a high base. Sanlam Personal grew net operating profit 11% to R1.95 billion and its short-term insurer, Santam, grew net operating profit 17% to R413 million. Normalised headline earnings grew 4% to R4.6 billion, compared with a growth of 27% in the prior period.
New business volumes increased 22% to R100 billion, with group equity value at R47.53 per share.