SOUTH AFRICA – It’s now two years since the Cape Town-based financial services firm bought Morocco’s Saham Finance for $1.1 billion, spreading 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.
Sanlam Ltd is now 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.
“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,” said CEO Paul Hanratty said in a video conference with the press.
“Ultimately, any company needs a strong home base. You need to be able to finance the growth elsewhere,” he added.
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 African market which accounts for most of its earnings.
Similarly, Sanlam plans to sell more of its products from life cover to mutual funds to existing customers, emulating rivals such as Discovery Ltd. which give discounts to clients using their different offerings.
Sanlam is repackaging its product suite and digitizing channels, the CEO said.
“There’s a lot of opportunity close to home, particularly to deepen the relationship with our customers”
Paul Hanratty – CEO, Sanlam
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 emphasized.
“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. We need to chalk that up for a couple of periods for investors for them to see the thing is rock solid again” said Hanratty.
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