Good afternoon, ladies and gentlemen, and welcome to Sanlam's 2025 9-month operational update. All attendees will be in listen-only mode. There will be an opportunity to ask questions when prompted. If you should need assistance during the call, please signal an operator by keying in star and then zero. Please note that this event is being recorded. I will now hand you over to Abigail Mukhuba. Please have a hit man.
Thank you, Operator. Good afternoon, ladies and gentlemen, and thank you for joining us on the call this afternoon. Firstly, I would like to extend my apologies from Paul Hanratty, our Group CEO, who is away on business travel with different time zones, and he is unable to join us today. On the call, I am joined by our Group Chief Risk Officer and Chief Actuary Mlondolozi Mahlangeni, and our newly appointed Head of Investor Relations, Dugello Mraudzi. Earlier this afternoon, we released our 9-month operational update for the period ended 30 September 2025. I will provide a brief overview of our operational and strategic progress before we move to our Q&As. The Group maintained strong momentum and delivered solid operational results. We sustained the positive financial performance delivered in the first half of 2025, with double-digit growth on key earnings and new business metrics.
On a normalized basis, net result from financial services grew by 19%. As communicated at our Capital Markets Day on the 16th of October, we have adopted a new financial reporting framework aligned with IFRS 17 to enhance transparency and simplify our reporting. One of the new KPIs we will focus on effective 1 January 2026 is operating profit. It incorporates unsmoothed investment market movements, which introduces greater period-to-period volatility. Although technically only effective from 1 January 2026, we have started to transition by providing in our update the unaudited operating profit movements as well. You will note that we reported the operating—you will note that the reported operating profit decreased by 3% for the 9 months compared to 2024.
Normalized operating profit, as a reminder, this means after excluding the impact of the one-off recapture fee in the 2024 base, amongst others, and excluding the impact of the investment variances, grew by 18% in line with the net result from financial services. We will report more detail on the new metric in the full year results in March. Life insurance recorded double-digit growth in net result from financial services that was in line with prior year on a normalized operating profit basis. The difference in growth rates was due to a partial reversal of the strong long-duration bond gains that were recorded in 2024, following unfavorable movements at the long end of the yield curve. New business volumes increased by 6% on a normalized basis, with VNB margins holding steady at 2.25%, similar to what we reported at half year.
General insurance delivered solid earnings and net earned premium growth across South Africa and Asia, with Santam and India maintaining healthy net insurance margins. Investment management growth was driven by strong performance in the South African multi-manager indexation and alternatives businesses, along with the Pan-African operations. Credit and structuring growth benefited from sustained growth in India and robust structuring activity in South Africa. Group net client cash flow increased by a pleasing 87% to just below ZAR 75 billion, supported by improved flows across all lines of business. The group solvency position remained strong and within target ranges on the 30th of September 2025. We are pleased with the continued progress on our strategic initiatives, especially the integrations at ASUPO and Sanlam Alliance. The integration of overlapping countries within the Sanlam Alliance joint venture is well advanced, with 8 out of the 11 countries completed.
Kenya and Mauritius are expected to close before the end of the year, while Morocco's integration is targeted for completion in 2026, subject to regulatory approvals. The South African component of the 91 transaction was approved by the Competition Tribunal in September this year. The transaction remains on track for completion, subject to regulatory approval and the finalization of the reorganization of SIM. Overall, we're pleased with the robust performance and continued strategic execution over the first nine months of 2025. This performance reflects the commitment of our people and the diversity of our operations and reinforces our optimism for the remainder of the year. Thank you. With that, we will now open the call for questions. Operator, back to you.
Thank you very much, ma'am. Ladies and gentlemen, we will now be conducting the question and answer session. If you'd like to ask a question, please key in star and then one on your telephone keypad. A confirmation tone will indicate that the line is in the question queue. You may key in star and then two to leave the question queue. Our first question comes from Michael Cristallis of UBS. Please go ahead.
Hi, Abigail. Thanks so much for the time. Three questions, maybe, if I can start. Firstly, can you give me an indication of what guaranteed annuity volumes have done in quarter three relative to quarter three last year? I know you said at June that they were down 30-40% for the first half. Just to get a sense of what's happened since then. The second question is also around volumes on the mass side. You spoke at half one about quite a lot of work that had been done to correct distribution, etc., through the convergence of Astropol and the other channels. What does mass volumes run rate look like for quarter three relative to, say, quarter one and quarter two? Has there been the expected recovery that you guided to?
Thirdly, I noticed your comment around investment variances being quite a lot lower than they were in last year as a result of some of the longer bond moves. We have obviously seen yields come down considerably on the tenure. Maybe can you give us a sense of what the delta looks like in the variance for nine months to nine months in terms of ZAR millions and maybe what the direction of that looks like for the quarter four to date with the yields continuing to fall? Thank you.
Thank you, Michael. We'll try to take them one at a time. In terms of the performance on delivering annuities, the life annuities sold in quarter three increased by circa 5% relative to quarter two. We have seen an increase in life annuities. In terms of the monthly run rates, the life annuities, we expect that that's going to improve over time. Initially, I think the thing maybe to flag is that we did comment that we saw that there was a decline in life annuities, mainly due to the market conditions, obviously. I think I just want to confirm also in terms of the actual life and living annuities, the split year to date for September, our living annuities was probably about 20% higher than last year in 2024 at the same time September year to date.
In terms of the run rate for retail mass, Q3, we did see an improvement in terms of their sales, particularly the ASUPO business. However, in terms of their direct sales or their direct marketing business, that business had been seeing a challenge in the first half, and we're starting to see the management actions, which include outsourcing some of that call center, starting to have a turnaround. It has been quite a short period still to actually see the direct impact. Overall, the volumes are picking up in that business. Your last question on the investment variances, if I may ask Mlondolozi to address that one.
Okay, thanks very much, Abigail. Good afternoon, Michael. Yeah, on investment variances, we did flag that the investment variances in the nine months to date were still positive, but they were lower than last year. You'll remember that in the first nine months of last year, the long bond yields, the 2048, dropped by about 150 basis points. In the first nine months of this year, it only dropped by about 90 basis points. The delta and the change explains part of the movement. The second aspect is that during the course of this year, we have rebalanced our bond positions in the assets backing the CSM portfolio, and we completed a lot of that rebalancing in the first half of the year.
There were some unfavorable yield curve movements in the first half of the year, and that is reflected in part of the investment variances that we see now. Going forward, we'll have a de-risk bond position. The third component is the fact that in the tail of the yield curve, you've got a dynamic relating to the 2053 and the 2048, which was unfavorable in the first nine months of the year. You'll recall that we do have quite a lot of liabilities in the tail of the yield curve, and that movement does impact it. In terms of ZAR figures for the first nine months of this year, the delta is of the order of about ZAR 400 million-ZAR 450 million.
Now, the last question is, given what we've seen in the yields, particularly in the past month and a half, and particularly the move that you saw yesterday, there's been a further reduction. There has been another, say, 80 basis points reduction in the yield curve. We no longer have the large bond position backing the assets, backing the CSM, and we are both immunized from large movements up or down in the yield curve. For the remainder of the year, there will not be material movements, at least from a level of the yield curve perspective.
Great. Thank you. Sorry, Abigail, just to clarify, you gave me the living annuity sales higher 20% year higher year than last year, but the guaranteed annuities relative to last year?
Oh, my apologies. The guaranteed relative to last year, Michael, I just want to look for that number. I'll give it to you just now.
Okay. No problem. Thank you.
Our next question comes from Warwick Bam of RMB Morgan Stanley. Please go ahead.
Good afternoon, everyone, and thanks for the time. Maybe just to follow up on Michael's question, really, just in terms of the investment variances as we move to the full year. Did not fully understand you very much just in terms of as we move into the fourth quarter, I think last year, a lot of the bond yield contraction happened in the first nine months, and there was very limited contraction in the last quarter. Given what we have seen to date, maybe just clarify whether we should see a better full-year comparative or slightly sort of softer base as we move to the full year. I just was not clear. Obviously, the equity markets, similar dynamic. Fourth quarter was quite soft last year. So far, this fourth quarter looks quite robust.
Second question, just in terms of rogue commentary, is there anything you do not talk about in the update, but is there anything for us to consider in relation to rogue in terms of what you have experienced in the nine months relative to the first half? Is there anything noteworthy that has changed relative to the first half? Thanks.
Yep. While you are right, I think just maybe to clarify the point is last year, September was actually a low point in the year from a yield perspective in the long end. The R2048 was 10.66 at that point, and it started climbing up another, say, 30-40 basis points to the end of the year. The yields actually went up in the last quarter last year, which is a different dynamic that you are seeing now where the yield has gone further down in the quarter to date. From a comparative perspective, it is important to bear in mind that we are not carrying the same position that we had last year. From a base perspective, we expect that there will not be further movements if yields move, we are not carrying that exposure anymore.
We should be able to, on a comparative basis, given that the yield curve movements were muted in the last quarter of last year, see good quarter-on-quarter performance if the yields stay where they are, barring the impact that I referred to earlier about what is happening in the tail of the yield curve. I hope that gives you further clarification, but if not, please let me know. On the next question around rogue gift, I mean, we've seen this year the equity markets are up close to 30% in South Africa, and we've seen a general reduction in yields across all our various markets. Also, we've looked at what has happened to rogue over the nine months and particularly the third quarter that you reported, the first half of the year.
There isn't anything material that is of concern for us from a rogue perspective. We expect that the rogue performance is in line with what we saw in the first half of the year, and we anticipate that it will be in line for the remainder of the year. Nothing is concerning on the operational side from a rogue performance perspective. Of course, the markets is what you see what is happening with equity markets and interest rates and effects.
Very helpful. Thanks.
The next question comes to Marius Stradom of ALG. Please go ahead.
Good afternoon, guys, and thank you for making the time. I have three questions. I think the most pressing one for me is why did your discretionary capital reduce so much over the period, considering the very strong performance in many areas? The second one is the very strong performance, net bank cash flows, etc., new business on the investment management side. How much of that is related to the 91 transaction? In other words, the benefits will be coming through your equity accounting in the future versus for your own account. The third question is, did your Pan-African PNC business make a loss in the third quarter?
Hi, Marius. Thank you for your questions. Maybe first to address your discretionary capital. We had a decrease from about ZAR 9.2 billion that we reported end of June to about ZAR 8.6 billion at 30 September. The majority of that amount was used in our Pan-African portfolio to support our sales rebusinesses credit rating. They go through a process with the credit agents, the rating agents. We were inputting or putting in support there so that we strengthen their basis for capital rating for regulatory solvency requirement purposes as well. That was about ZAR 500 million of that move. On the net client cash flow, maybe first just to confirm that obviously with the transition in regulatory approval processes still and not yet effective, all of the cash flows that we received were obviously totally within the Sanlam stable, not necessarily 91 stable.
I think one would think that with the transition happening at the same time, you're likely going to have some disruption and not necessarily secure the same levels of cash flows, but we managed to secure the same levels of cash flows. In terms of how much of it is going to be below the line or within just 91, we haven't shared those numbers publicly, but we should hopefully be able to start sharing them once the transaction is approved and effective. I think that was the two questions. I did want to get back to Michael before I forget your question on the guaranteed annual. Oh, yeah.
No, no. My first question was whether the Pan-African PNC business was loss-making in the third quarter.
Oh, yeah. Sorry. I apologize. I forgot that. The Pan-African business, the general insurance business, was not loss-making in the third quarter. There was a slowdown in some of its profits. If you look at, and I'm not sure the numbers that you're looking at, but if you look at the normalized basis, it actually performed quite solidly. I think we must just remember that on an actual basis, you do have the dilution because of the Sanlam Alliance increase in their shareholding as well as the folding in of the Namibia business into the JV. No, they did not make losses in the third quarter.
Thank you.
Michael, the guaranteed annuities, I did check those numbers. Year- on- year, it was circa 30% down, and then quarter on quarter, it was circa 20%.
Our next question comes from Zayd Lockney of HSBC. Please go ahead.
Hi there. This is Faisal Nakarani from HSBC. I just wanted to follow up on a few of the questions that were already answered. One was on the VNB growth in the nine months versus the H1. I can see VNB growth in South Africa was down -10%, normalized year- on- year versus H1 down -9%. If I've understood correctly, your comments suggest that you've seen a bit of bounce back in life annuities and even guaranteed annuities. Could you explain why that VNB growth is down on a nine-month versus H1? Secondly, on the interest rate moves, I understand that it's fairly neutral to the P&L, but in terms of volume growth, if interest rates stay where they are, what happens to your view in terms of guaranteed annuity sales for Q4? Thank you.
Thank you. In terms of the VNB, we did talk about, obviously, the impact of the fact that structurally your Astropol business relative to the former Capitec business, you do see the structural shift in that the Astropol business VNB is higher earnings generator, but lower VNB generation. In terms of the overall trend of the VNB, we did see that in the retail mass business, there was a decline primarily due to lower sales in the group business segment and a bit of weaker agency sales in the individual life business. On the retail affluent business, we saw a decrease in the VNB, mainly driven by, again, the shift in the sales mix at Glacier, where we saw a change in the sales mix from life to living annuities. This was further impacted by less profitable annuities pricing compared to prior year.
Obviously, I think it's reflective of the competitive market that we are operating in. From a corporate segment, it was actually the opposite. We saw an offset in that their VNB increased slightly, supported by favorable change in the product mix as well. Those were the main drivers in the decrease for VNB in South Africa. What was your second question?
Sorry. Just with that one, was that a Q3 phenomenon or are you talking about a nine-month phenomenon?
I'm talking about what you call the slowdown from June- September.
Okay. Perfect. Thank you. Sorry, my second question was, if interest rates stay where they are, what's your outlook for guaranteed annuity sales for Q4?
Yeah, thanks for that question. The outlook, there is clearly a correlation between the level of long bond yields and the volumes of life annuities. The slowdown in annuities, you may recall that if you look at last year as the first half of the year was strong annuity volumes and the second half, that's when the slowdown occurred. What we've seen in the first half of the year, if you look at year- on- year, actually the quarter-to-date drop, as Abigail indicated, has been slightly better than it was in the first half of the year. When you look at the outlook, if yields continue to drop, I mean, we see now the 2048 is about 9.5% at some point during the day today.
If they stay where they are, that phenomenon where in terms of the mix, there'll be slightly lower volumes on their life annuities compared to living annuities, we will expect that phenomenon to play out. That means that if yields stay where they are, you should be able to see some pressure still on the life annuities. Equally, when we are able to generate good volumes on the living annuity side, particularly given what has been happening to equity markets being up 31% year to date, looking at what happened in this week, for example. The pressure on the volumes on the life annuity side would be expected to remain if the yields remain at the current levels or fall even further. At the same time, equity markets remain very strong. We are able to provide compelling product propositions for both classes of products.
We expect the phenomenon to play out as we've observed in the past insofar as correlation is concerned between yields and volumes.
Fantastic. Thank you very much.
Ladies and gentlemen, just a further reminder, if you'd like to ask a question, you're welcome to key in star and then one to place yourself in the question queue. Our next question comes from Pancho Datoy of Anchor Stock Brokers. Please go ahead.
Hi guys. Can you hear me?
Yes, we can.
Yes, we can. Excellent. Thank you. First question is it relates to Shriram Finance. I see the share price is up around 40% there since you reported your results. Maybe if you've got a sense of what's behind that strong rally and if you can just confirm that your ownership there is still at that 9.5% level. Maybe in relation also to that share price movement, what your views are insofar as I guess your investment in Shriram Finance is not as core as the other financial services products within that Shriram Capital environment. Also, if you can give an update in terms of the increased investment in the insurance operations there, that's been taking a long time, obviously, to come through. Just a discussion around India firstly.
The net flow has been very, very strong, but there's been a slight slowdown versus the run rate we saw at the half year. If you can maybe give a bit of color to that as well. I think the other questions have been asked already.
Thank you, François. The performance on the India front, I think firstly you've got the general macro environment in as far as the economic growth trajectory in the Indian market that generally supports and carries some of the performances of those businesses there. We also saw towards the latter part of Q3, we also saw some regulatory changes in some internal treatments of GST that have actually boosted some of the volumes, although still early stages. Overall, I think the share price performance, obviously a combination of the underlying business obviously performing well, but also the fundamentals of that market in India. You talked about the investment not being core. I'm not sure I understand the comment completely because we look at the portfolio at large, the India portfolio, and all of it is core to the Sanlam business.
We may, what you call, readjust the sizes of the portfolio, but by and large, the full portfolio as a whole, the integrated portfolio with the different lines of businesses are core to the group. As far as the increase in the life insurance, the approvals that we continue to wait for, it is our understanding that there is a court hearing that is scheduled for the 8th of December, wherein we should be able to find some clarity and certainty on the way forward. I think in the meantime, there were other questions that do come up, which you have not asked this time, is to talk about the actual agreed price and our exposure to it in terms of time that has passed.
That agreed price has not been moved or has not shifted, and we have taken out a hedge in as far as securing the currency volatility since signing until closure of the transaction.
Okay. Excellent. Just the other question around the slight slowdown in the net flows, please.
Sorry, Francois, can you ask the question? There's a slowdown in which net flows?
Yeah. The overall net flows was very, very strong at the half year or so, was tracking around ZAR 60 billion. It's up to ZAR 75 billion. Sorry, I think it was sitting at about ZAR 68, ZAR 70, more than ZAR 60 billion. It's up another ZAR 15 billion. The run rate is slightly slower in the last quarter. It's impressive nonetheless, obviously, in aggregate for the nine months. If you can maybe just go into a bit more detail, maybe it relates to the answers you've already given in terms of annuity sales, for example.
Oh, sorry. You meant that, sorry, I thought you meant flows in the context of India. You mean in general. I think really it's just an indication of the market dynamics overall in South Africa. We did say that in the first half, it was exceptionally, we had very good flows, and we're not too sure if they're going to be sustainable at that level going forward, but it was more just indicative of what's happening in the market. There were no specific drivers to why the run rate has slowed down.
Okay. Excellent. Maybe a final question. The extraordinary bond market movements that you've spoken about already, I think you've given us an indication of the impact that could have on sales, for example. I guess in the short term, more importantly, all of your matching and immunization holding up well in this environment. Any unforeseen impacts of the steep bond yield movements?
Yeah. Good afternoon, François. As you have indicated, I think our close LM matching discipline is working well insofar as immunizing ourselves against the exposure. If I maybe remind what we have stated, we have a very close matching on the assets backing our best estimated liabilities to ensure that we immunize our exposure to the yield curve. However, as I indicated, the assets and dynamics at the long end of the yield curve, where you have some of the longest dated bond is the 2053, and it is not available in sufficient supply. As a consequence, there is some cross-hedging at that long end of the yield curve, which does mean that your LM cannot be as 100% precise. Apart from that dynamic, our LM across all market respectives protects us very well.
There is a dynamic relating to certain market risk exposures an entity can have in the assets backing the CSM and the RNFR, essentially the assets backing your future store of value. There is a strategic asset allocation approach that is taken in determining what market risk exposures you want to have. That is one area where over time we have been de-risking our exposure to bond yields. Therefore, our exposure is much lower than it was, for example, at this time last year. The sudden volatility that you are seeing in the yield curve would have a lot less impact on our balance sheet at this point. All in all, we are comfortable with our LM and the extent to which it is protecting us.
Excellent. Thank you very much.
We have a follow-up question from Michael Cristallis of UBS. Please go ahead.
Hi guys. Sorry, just two more quickly. Your credit and structuring net result from financial services has slowed down quite a lot since half one, which implies our guess quarter three with a significant slowdown. Is there any one-offs in last year's quarter three that we need to be aware of, or can you remind me? This is something that's going on in quarter three this year. Just give us an idea of what's caused that. I noticed you haven't reiterated your target for the full year of ZAR 15 billion-ZAR 16.5 billion of net result from financial services. Is that still intact? Thanks.
Thanks, Michael. Maybe starting with the last one first. I think we did reiterate that we remained confident in our through-the-cycle targets. If you do that calculation, it works out to it's confirming the NRFS target as well that we came out with at the beginning of the year, and we said it half year. We are still optimistic and do not see anything really, all else being equal, that will not lead us to achieving that. We are still confident in that. In as far as the credit and structuring business, there are not really one-offs in the prior year. We did see during this period in the South Africa business, we strengthened our provisioning, our bad debt provision. Firstly, we have seen significant book growth, but we have also strengthened our technical accounting way of how we provision for bad debts.
Although our credit loss ratio still remains at acceptable levels in as far as how we manage it internally, we are still comfortable with that. We did just bump up a bit some of our provisioning, and that has slowed down some of the performance.
By that, I assume you mean it's all in SA rather than India, right? Because India has done quite well from what I can see from the report.
Mostly it's in SA. Yeah, mostly it's in SA. It's a combination of our strengthening of the provisions, but also because the book was growing, there's a bit of business strain from the growing book. On the India side, improving trends since June. It's actually performed very well, and we've seen a decline in their, sorry, it's actually performed very well.
Great. Thank you.
Ladies and gentlemen, just a final reminder. If you'd like to ask a question, you're welcome to key in star and then one to place yourself in the question queue. We have a follow-up question from Marius Stradom of ALG. Please go ahead.
Thank you. Just on the last point, obviously the improvement in Shriram since June will only be reported in your full year results because of three-month lag.
Correct.
Just quickly, on the retail affluence side, can you please give us an indication of what the contribution was from Capital Legacy and BrightRock to new businesses?
Marius, I'm going to have to get that. We happen to disclose that separately, especially at a nine-month level. Generally, we would have it at half year or full year. I'm going to have to get that. I'll make a note.
Are these businesses doing well? Because that seems to be the case.
Yes, they're performing relative to expectation in prior years. Yes, they're performing well.
Okay. Then my final question is Santam related. Obviously, as a shareholder, Santam had really an exceptional third quarter. It does seem to be an industry issue. A lot of cash generation, additional cash generation that would not have been expected. Do you see a potential special dividend from Santam over time, or would that be something that you would, as a majority shareholder, be pushing for?
We are always hopeful for a special dividend from any of our shareholders, obviously. I think where Santam is concerned, we are all aware of their new venture with the Lloyd's Syndicate 1918. I think Taverns Bickers and their team have flagged that at the initial stages, at least the first 12-18 months, whilst they're establishing or solidifying the roots of that Syndicate 1918, they're going to be cautious with their dividends. If I remember correctly, the comments were that they do not see a change in the ordinary dividend as far as capital requirements are concerned, but they will consider special dividends only after considering the capital requirements of the syndicate setup as well. Marius, from our side, yes, as a shareholder, you would love to have a special dividend, but you would prefer to have highest returns possible wherever the money is invested.
If the money invested in the Lloyd's Syndicate gives us better return, we're more than willing to wait.
All right. Thank you very much. Let's hope for a credit rating upgrade tomorrow.
Of course. Of course. We're crossing fingers.
Thank you. Ladies and gentlemen, with no further questions in the question queue, we have reached the end of our question and answer session. I will now hand back to Abigail Mukhuba for closing comments.
Operator, thank you very much to everybody for participating in the call and for your continued support. I think we've been talking to you since October and now. We look forward to speaking to you at the announcement of the annual results in March 2026. With that from our side, thank you all, and thank you, Operator, for always facilitating so well.
Always a pleasure, ma'am. Ladies and gentlemen, that concludes this event. Thank you for joining us, and you may now disconnect your lines.