Our opinion on the current state of SANLAM(SLM)

Sanlam is a powerhouse in the insurance and financial services industry, not just in South Africa but on a global scale. Established in 1918, it has expanded its operations significantly over the years, now reaching into multiple continents including Africa, Europe, America, and Asia, with particularly strategic operations in the UK, America, Europe, India, Australia, and across several African nations. This extensive geographic footprint underscores its status as one of the most influential and comprehensive providers in the financial and insurance sectors worldwide.

Operational Structure and Strategic Acquisitions:
Sanlam’s business structure is divided into four primary segments:

1. Sanlam Investment Holdings (SIH): A significant portion (25%) of which is owned by African Rainbow Capital.
2. Sanlam Emerging Markets: This includes an 84.5% interest in Saham, a major player with operations in 33 French-speaking countries.
3. Sanlam Personal Finance: This is the biggest contributor to profits, largely focused within South Africa.
4. Santam: Sanlam owns a 61% stake in this South African insurer.

Sanlam’s strategic acquisitions, such as the majority stake in Catalyst Fund Managers and the purchase of Alexander Forbes group risk and retail life business, further demonstrate its aggressive growth strategy and commitment to diversifying its portfolio.

Financial Performance and Market Position:
For the six-month period ending on 30th June 2023, Sanlam reported an impressive increase in net results from financial services by 26% and a dramatic rise in headline earnings per share (HEPS) by 118%. The company’s performance was bolstered across various lines including general insurance, life insurance, and credit structuring.

Further, the nine-month operational update to 30th September 2023 showed new business volumes up by 13% and operational earnings up by 35%, with a robust solvency cover ratio of 170%, reflecting strong financial health and regulatory compliance.

In its latest trading statement for the year ending 31st December 2023, Sanlam projected a significant increase in HEPS of between 43% and 53%, attributed mainly to higher investment returns on the shareholder capital portfolio.

Investment Outlook:
Sanlam has demonstrated a consistent ability to generate robust growth and maintain a solid financial base, making it a compelling choice for investors. With a current price-to-earnings (P/E) ratio of 10.43, the company is positioned as an attractive investment relative to its past performance and future growth potential. This valuation suggests that Sanlam offers good value, particularly considering its strong recovery post the coronavirus market downturn and its historical performance stability.

Conclusion:
As one of the JSE’s blue-chip stocks, Sanlam represents a substantial investment opportunity, especially for those looking to invest in a company with a broad international presence and a diversified service offering. Its proactive approach to growth through strategic partnerships and acquisitions, combined with a solid track record in financial performance, positions Sanlam as a strong contender for long-term investment.