Good day, and welcome to everyone joining us online today. My name is Tokelo Mulaudzi, and I'm the Head of Investor Relations here at Sanlam. My role here today really is to serve as an emcee for the event, which is Sanlam's 2025 results presentation, and to facilitate the discussion with our Group CEO, Mr. Paul Hanratty, our Group Finance Director, Ms. Abigail Mukhuba, as well as our Group Chief Risk Officer, Mr. Mlondolozi Mahlangeni. They are joined by members of the executive team who will be available during the Q&A session. Before we begin, a few housekeeping points. Today's presentation will be followed by a question- and- answer session.
For those of you who are joining us via webcast, you may submit your questions through Corpcam and those joining telephonically, we will open the lines at the end of the presentation. The presentation slides and the results announcements were released earlier today and are available on Sanlam Investor Relations website. With that, it is my pleasure to hand over to our Group CEO, Mr. Paul Hanratty.
Tokelo, thank you very much and welcome to Sanlam. Good afternoon, ladies and gentlemen, and a very warm welcome to the results presentation for 2025. This is the normal disclaimer we're putting up. Today, I'll begin with an overview of the 2025 year, our strategy and key developments across the group. Abigail will then take you through the financial results in more detail before I conclude with our priorities and outlook for 2026. We intend to provide somewhat more detailed guidance than usual. As you know, we are changing our financial reporting framework in 2026, and this will require an adjustment for people who are trying to analyze our financial results. When we began 2025, we focused very intensively on the likely impacts of the predicted tariff changes, ensuring that our balance sheet and business were protected from potential volatility.
We examined several scenarios, mostly very negative in the lead up to Liberation Day. As things turned out, of course, the market outcomes for the year were very positive. The S&P 500 returned 17.9% in dollars. The return on the JSE was just under 34% in rands. The 10-year South African government bond yields fell by over 200 basis points, and the rand strengthened against most major currencies very strongly in late 2025. The gold price also soared, increasing by over 60%, an indication of the inherent risk in the system. It was against that backdrop that in 2025 we produced a strong set of underlying operational results combined with good strategic execution. Sanlam's record of consistent high quality growth has been supported again by the 2025 results.
However, it takes some very careful analysis to see this for two reasons. Firstly, there were significant portfolio changes during the year that distort headline results. In 2024, the closure of the Capitec joint venture resulted in a large one-off profit. Furthermore, the acquisition of Assupol in late 2024, the disposal of Namibia into the SanlamAllianz joint venture, and the sale of some of that joint venture to Allianz changed the shape of the overall group operations during 2025. Effectively, we sold income generating assets, giving up both earnings in the form of net results from financial services, as well as investment income on the relevant net asset values. In exchange, of course, we boosted our discretionary capital to fund a step up in our Indian insurance exposures.
This step up in India has only happened in early 2026 as the regulatory approvals finally came through after nearly two years of waiting. Aside from these changes in the group structure, the second reason that makes interpreting these results tricky is the strengthening of the rand in the fourth quarter, which has had a huge impact on the investment returns on shareholder assets, negatively impacting the rand return, but of course not the local currency returns. 2024 experienced the opposite effect from rand weakness, so we see a large negative swing in investment returns once quoted in rands from 2024- 2025. A very simple way to understand the impact of the rand strength in late 2025 is to look at the analysis we have in our pack of the return on group equity value.
Despite a very significant uplift to the group equity value from excess underlying investment returns, the Forex impact, which was negative, was even bigger than the positive investment impact by a factor of a third. That's a very large increase in our results from Forex. In the year, we delivered very strong new business momentum with group new business volumes up by more than 20% and net client cash flows exceeding ZAR 125 billion. This performance reflects the structural attractiveness of our growth markets and the strength of our competitive positioning in each market. This growth in new business and assets under management forms the foundation for future years of growth in earnings and dividends. Strategically, we have now largely completed a multi-year repositioning of the group. We've simplified our portfolio, strengthened our exposure to high growth engines, particularly India, and exited lower return or non-core operations.
Importantly, this repositioning has created a stronger, simpler, and more resilient platform from which we expect sustained growth from 2026 onwards. Financially, the group produced strong earnings and cash generation with our net result from financial services up by 20% on a like-for-like basis. This has enabled us to increase the dividend by 9% while maintaining a healthy balance sheet and capital flexibility. Of course, as we begin 2026, the global outlook is heavily clouded by events in the Middle East, and I will return to these later. Our vision for 2030 remains unchanged. We aim to be a leading emerging markets financial services group, delivering sustainable long-term growth in high potential markets.
The scale and quality of each of our businesses, serving customers in a way that builds our brand equity and demand over time, has created a platform for growth for the group. Aside from our market positioning and competitive strength, we've identified five growth vectors as an overlay to drive growth further. Our through the cycle 2030 targets are clear. Some of these targets will only be attained towards the end of the period leading up to 2030, but they do act as a guide to the direction of travel. During 2025, we did not yet meet all of these new targets, and we do not expect to meet all of these targets in 2026. However, the 2025 results do provide us with confidence that these targets are attainable over time.
Abigail and I will provide some more detailed guidance when we come to finance and to closing as we shift to a new reporting framework under these new targets. Sanlam has been known for delivering consistent and high quality growth over time. Since 2021, our net result from financial services, which has been our core earnings measure, has grown by 14% per annum. Dividends have grown by 10% per annum, and new business volumes have grown steadily with new business written on terms that are expected to generate strong future returns, with the IRRs embedded in this new business above 20%. While 2024 included a one-off reinsurance recapture fee, which elevated the base following the closure of the Capitec joint venture, our 2025 results reflect strong underlying operational performance.
The 2025 results include some specific impairments in respect of our investment in AfroCentric and the Malaysian general insurance business that we deem prudent. Despite this, the return on group equity value on an adjusted basis has remained above our hurdle rate throughout the period since 2021. Turning now specifically to 2025. Group new business volumes increased by 22% on a normalized basis to reflect underlying organic growth. Net client cash flow was an outstanding ZAR 127 billion, reflecting the ability of all of our businesses to manage our clients' assets.
New business added ZAR 2.3 billion to our group equity value, but it was 11% lower in 2024 on a normalized basis, reflecting a change in the mix of business written in South Africa as interest rates fell, as well as impacts of regulatory changes in India. As I mentioned earlier, net results from financial services increased by 20% on a normalized basis, reflecting strong underlying profit growth driven by organic growth, good mortality, persistency, and GI underwriting experience in South Africa. Our earnings on the current financial reporting framework ended the year ahead of the midpoint of our guidance. Although the second half was a little lower than the first half, this was entirely due to negative performance in the fourth quarter of the year relating to our SanlamAllianz joint venture's general insurance business and the reinsurance business within that.
This is being addressed. It is short-term in nature, and the underlying momentum of earnings into 2026 is excellent. Net operational earnings increased by 5% on a normalized basis, much slower than the growth in the net result from financial services. This is due to lower investment returns and increased finance and project costs. Just as a reminder, net operational earnings adds the investment return on shareholder funds to the net result from financial services. Investment returns on shareholder funds were hit very heavily in the fourth quarter by the strengthening of the rand. Non-South African assets declined heavily in value as the rand strengthened. Adding to this negative return in rands on these assets was the impact of a hedge taken out by the group on the Indian rupee to remove the currency risk on the Indian insurance transactions.
Whereas I said earlier, we've been waiting for approval for these transactions for two years. Furthermore, for those of you who followed the Santam results, Santam held unusually high U.S. dollar deposits in anticipation of the Lloyd's Syndicate as a way of hedging against the funding risk that would have arisen from rand weakness. Underlying returns in local currencies remain good, but in financial statements expressed in rands, the overall investment return stalled in the fourth quarter of 2025. Project costs were elevated in the second half of 2025 as a result of the work done to get the Lloyd's Syndicate up and running and the Shriram Finance transaction to bring MUFG in as 20% shareholders.
The latter transaction has already unlocked a great deal of value for shareholders, but the complexity of the transaction required extensive use of advisors to ensure that the long-term strategic position of Sanlam is retained. Adjusted return on group equity value was 15.7% above our hurdle rate despite the several impairments that I mentioned. Interestingly, as I said earlier, the actual return on group equity value was lower at 13.4% as the very strong rand more than offset the impact of excellent investment returns. In future, we'll also focus on return on equity, ROE, which ended 2025 at 18.1% if you exclude the impact of investment variances.
It's important to note that the Shriram Finance transaction with MUFG and the transaction that the group concluded with Ninety One will only result in significant write-ups to the group equity value in 2026. This is assuming that the Shriram Finance and Ninety One share prices remain around about the levels that they currently are trading at. The project costs that were so elevated in 2025 and associated with these transactions will only see that benefit come through in the current year. Financial strength remained excellent, with the economic solvency ratio at 183%. The strong operational performance underneath our business underpins the board's decision to declare a dividend of ZAR 4.85 per share, representing a 10.4% per annum three-year compound annual growth rate in dividends.
This is a strong set of results that creates a solid foundation for 2026. In South Africa, execution has been disciplined and focused. A strong set of financial results has been delivered alongside the development of an active asset management partnership with Ninety One and the integration of Assupol into Sanlam's operations to strengthen our retail mass offering. The Ninety One transaction sharpens our focus on scalable, fast-growing, and profitable investment capabilities while retaining strategic alignment in active asset management through a 12.5% equity stake in Ninety One. Over time, we expect this transaction will drive faster earnings growth for the group because we're left with faster-growing businesses. In 2026, we will still have some costs associated with the active asset management business sold to Ninety One.
By the end of 2026, we expect to have removed these costs fully from our base. The Assupol integration has been highly successful, and financial performance in this business was strong, with double-digit growth across earnings and new business metrics. Persistence here has improved considerably, and agent productivity is up 32% over the prior year. We've also enhanced our physical presence in the retail mass market, and we expect that this will assist with the rollout of banking services and credit into this market. In 2025, we finally completed the restructuring to settle the long-term shareholding structure in our partnership with Allianz on the African continent outside of South Africa. The SanlamAllianz integration is largely complete, with 10 out of the 11 markets concluded. The final large integration, which is in Morocco, should be completed in 2026.
The business can now begin to take advantage of its strong brand and market positioning across the continent, focusing on the core business now that the restructuring is largely behind us. Growth in new business and operating performance in the life insurance business were excellent. However, performance in the general insurance business was extremely disappointing. Earnings in this line were negatively impacted by adverse tax assessments, increased tax provisions, and far higher than normal large corporate claims in our SanlamAllianz reinsurance business. The insurance result was still within our target range, but lower than 2024. Remedial action has already been taken with a completely new senior management team appointed at SanlamAllianz Re. This management team has been brought in from Allianz in Germany, and there's an intense focus on improving underwriting, claims reporting, and reinsurance, as well as putting in supporting systems.
These changes will gradually take effect as business needs to renew before you can write it on new terms. In India, as I said, we finally had regulatory approval for the increases previously announced to step up our life and general insurance stakes. We furthermore agreed to acquire a further stake in the life insurance business because although this business is currently facing strong regulatory headwinds, we believe it is well positioned for long-term growth and profitability. Sanlam has agreed with Shriram to introduce MUFG as a 20% shareholder into Shriram Finance.
That has provided that business with over $4 billion of capital to deploy in driving future growth, which in time we expect to fuel further growth in the insurance businesses. The Shriram Finance share price responded positively to the MUFG capital injection news, reflecting the market view that higher growth can be expected going forward. It's obvious, of course, that the ROE is diluted in the short term. Growth in 2025 in India continued. Profit growth in the credit business was muted by a very conservative approach taken to funding in the light of the expected global turmoil and potential shortages of liquidity that we faced in early 2025. Profitability remained very strong in the general insurance business, but the life insurance operations faced a combination of aggressive distribution growth and three profound regulatory changes that resulted in operating losses.
As structural changes to our life insurance business take effect, we expect profitability to gradually return to this business. I won't spend much time on it. For those of you who followed the Santam results, you'll know that Syndicate 1918 has transitioned to business-as-usual operations following final approval at Lloyd's. Our capacity exceeds GBP 300 million, and a seasoned London executive team is in place, and the systems infrastructure has been successfully deployed. Pleased to say that we've already, in the syndicate, concluded some consortia and facility lines of more than $40 million to date. This expands our specialist underwriting footprint internationally and strengthens Santam's long-term strategic positioning. Sanlam is publishing a new sustainability index for the first time. This is an average of a number of external rating agencies' scores on ESG performance.
The 2025 score is 3.84 out of five, and we've set ourselves a target of getting this up above four by 2030. Sanlam does, however, take a much broader view of sustainability than traditional ESG measures. In addition to the sustainability index, we are tracking complementary indicators, including those covering social impact and financial inclusion, which are critical in our markets. We also assess climate risks through both our investment portfolios and underwriting activity lenses while monitoring customer health, employee wellbeing, and engagement. This broader perspective reflects the realities of the markets in which we operate. Poverty, limited healthcare and education, low financial participation, and significant climate exposure shape long-term growth prospects in these markets. We believe strong customer outcomes and engaged employees are essential to unlocking this potential.
At this point, I'm going to hand over to Abigail, who's going to take you through the financial results and also provide some detailed feedback and outline of how investment variances have arisen, as well as providing some financial guidance for the year ahead. Thank you very much.
Thank you, Paul. Good afternoon. As Paul has outlined, our 2025 results demonstrate strong underlying earnings, resilient returns, and disciplined capital allocation, with temporary pressure from mix, forex, and organic growth investment phase, which temporarily masks the strength of Sanlam's operating momentum and growth platforms. I'll now go through the results. Firstly, before I go through the results, I also just want to flag again that we normalize the numbers to strip out portfolio reshaping, currency, and one-off effects so that you can see the underlying earnings trajectory clearly. Corporate activity and one-off items added 15% to NRFFS growth if you adjust for that or normalize for that. This is particularly relevant because 2024 benefited from an elevated base driven by the ZAR 1.4 billion reinsurance recapture fee mentioned already.
If we adjust for constant currency, that would also increase our net result from financial services by 2%. As Paul mentioned, the bigger or more important impact of currency is what we see in the impact on net operational earnings and the return on group equity value. Net result from financial services was just below ZAR 16 billion, up 20% on a normalized basis. The group's earnings growth continues to be broad-based and cash generative, reinforcing our confidence in our ability to deliver at least 6% real earnings growth through the cycle to 2030. Underlying NRFFS performance remained strong and aligned with our third quarter run rate. The full year outcomes were tempered by the weaker fourth quarter, particularly in Pan Africa GI.
SanlamAllianz joint venture profitability in the GI operations was affected by the combination of the higher tax settlements and increased tax provisions raised, as well as elevated mid-sized corporate claims, mainly within the SanlamAllianz Re business. Net operational earnings increased 5% year-on-year versus 16% growth reported at the end of the third quarter. This was driven, as already introduced, by significantly lower investment returns in the last quarter. I will go through the detail in later slides. The other item that impacted this was the higher project cost that was associated with the deliberate investment in future growth and one-off costs associated with the setup of the syndicate, the Lloyd's Syndicate, as well as the MUFG India transaction.
I think one thing we want to flag is that although our project expenses were elevated for reasons already mentioned, business as usual project costs not funded by the Future Fit Fund are approximately ZAR 500 million per annum, and we expect project spend to progressively normalize toward the sustainable level as current investment phase concludes, and this is expected to rebase in the 2027 year. This slide explains what reduced investment return and shareholder funds in 2025 relative to 2024. The investment return on shareholder funds are added to NRFFS to get to the net operational earnings. Investment variances in respect of guaranteed liabilities written are, however, not in NRFFS and are smoothed through the AMR. The reduction in returns on shareholder funds in 2025 has arisen for completely different reasons to the investment variances smoothed through the AMR.
Net investment returns reduced to ZAR 1.9 billion compared to the ZAR 3.5 billion in 2024, and this decline was not driven by weaker asset performance. Rather, it was largely driven by the currency movements in the fourth quarter of 2025. Roughly half of the Group ZAR 60 billion net investable assets within the shareholder funds are non-South African. Within the overall investment return on shareholder funds, net investment income declined only modestly since the strengthening of the ZAR happened toward the end of the year. The underlying portfolios are well diversified across interest-bearing assets, equities, cash, and liquidity instruments, which supports solvency. This bridge on the slide unpacks the drivers behind the actual reduction for 2025, with the biggest single item, as mentioned, being the impact of the currency, particularly the Indian rupee and the U.S. dollar.
As I said, most of it happened in the fourth quarter. Its impact was twofold. For Santam, the combined Forex loss of about ZAR 265 million emanating from Forex held in the U.S. dollar to position capital for the launch of the syndicate, as well as Forex capital backing Santam's international Forex denominated liabilities. We also advised previously that we took out a hedge to protect India transaction, the India transaction purchase price in the event of the rand weakening over the period till we got the approvals. This obviously offsets the lower ZAR price eventually paid, although the loss on the hedge is reported in this line. This is the same Forex effect that you will later see flowing through the investment variance and the RoGEV bridge.
Finance costs increased year-on-year, primarily because in 2024, with the Assupol acquisition, we incurred 3 months' worth of interest costs. In 2025 we incurred 12 months, and we did not normalize for these. Importantly, these funding costs are now embedded and do not continue to step up from here. 2025 equity returns in India and Pan Africa were considerably lower than what we saw in 2024. Also reminding you that when we report our India numbers, we report on a three-month lag. As we move to 2026, the one-off hedge is now closed with the completion of the insurance transactions in India. Forex impacts we expect will always remain and of course, can move in either direction. In 2024, there was support for the investment returns from a weaker ZAR.
The funding costs going forward, we expect to stabilize. On returns, actual return on group equity value was 13.4%, while adjusted return on group equity value was 15.7% above the group hurdle rate of 14.7%, and this demonstrated disciplined value creation. The difference to actual RoGEV is largely driven by Forex translation. Again, you can see this theme coming through as already mentioned, and does not reflect deterioration in the underlying economics. This was partly offset by the positive economic assumption changes, including lower risk-free yields and strong markets. Adjusted RoGEV was supported by solid VNB contributions across the group, positive operating experience, particularly in covered businesses, and a strong contribution from our South African GI business, which delivered an attractive return on capital.
Operating experience was positive overall, driven by the South African life risk experience and improved persistency, partly offset by weaker Pan Africa GI. Credit spread and working capital experience were also positive on good credit margins and working capital income. Assumption changes were net negative, reflecting impairments in the SA health business following notice of termination received from one of their largest clients. Also Malaysia GI business was impaired, coupled with a revised Pan Africa GI outlook. Weaknesses are contained, addressed, and not allowed to erode group value. Impairment decisions and assumption changes are taken decisively, protecting future returns and no dilution of dividend despite short-term pressure. Importantly for us is that these assumption changes are well contained within capital buffers and do not alter our long-term return profile.
On this slide, we are highlighting the embedded upside in our listed investment that is not yet reflected in reported GEV. At the end of 2025, if we were to value the listed holdings at prevailing share prices rather than discounted cash flow, there would be a potential GEV uplift of around ZAR 6.7 billion. The bulk of this relates to SFL, where our valuation is prudently kept at 110% of the 12-month VWAP. At the year-end share price, this implies ZAR 6.3 billion of upside that is currently excluded from GEV. On our Ninety One investment, the South African listing contributes a further ZAR 452 million, while the U.K. listing is already reflected at market value. We remain conservative in our valuation approach, and over time, we expect that the VWAP will reflect the market price.
The group remains well capitalized with economic solvency cover ratio firmly within our target range. Discretionary capital increased to just over ZAR 8 billion, mainly from portfolio actions, including the sales transaction with Allianz. Importantly, ZAR 5.7 billion was ring-fenced for India Life and General Insurance transactions, reflecting our conviction in India as a core growth engine. Now that these transactions have concluded post-year end, the elevated discretionary capital position at year-end that was temporary, we've reported that the capital has already moved back to our ZAR 1 billion-ZAR 3 billion rand target range since these transactions have now closed. Our growth continues to convert into strong, predictable cash flows with more than 60% of our earnings profit remitted to the group.
This level of remittance reflects the progress we've made in consolidating platforms and strengthening our operating model across key markets, making the group more scalable and resilient. A portion of the cash generated is used to service our low debt levels, while retained cash is primarily deployed into our India and Pan Africa businesses for structural reasons. This cash profile supports our dividend framework, which remains aligned to our rolling three-year CPI plus four target through the cycle. In 2025, this supported a ZAR 10 billion dividend at a one times cover while maintaining balance sheet strength and funding organic growth. Bringing this back to business because ultimately the sustainability of the returns, the dividends, as well as solvency, is driven by the operational performance of the underlying business.
I would like to now go into the detailed line of business analysis. Let me start with the Life and Health business. This business delivered PVNBP premiums of ZAR 114 billion, which was about 10% up, which demonstrates strong sales momentum. Our earnings were over ZAR 9 billion, down marginally on an actual basis, yes, but up 25% on a normalized basis, supported by favorable mortality experience and higher asset-based fees. South Africa delivered strong underlying earnings, with retail mass benefiting from improved persistency and mortality, as well as corporate showing solid fee growth. We saw strong single premiums in corporate and affluent. We also saw solid affluent recurring premiums and an overall resilient demand in retail mass, supported by individual life and Assupol. Corporate was driven by strong single premiums despite weaker groups, group risk.
Pan Africa delivered strong growth led by bank assurance in Egypt and West Africa. India earnings were muted by higher new business drain and regulatory changes, but the long-term outlook remains attractive given the continued investment in scale. India's PVNBP is up, driven by individual life sales. VNB declined 11% on a normalized basis, largely due to the shift towards market-linked annuities in South Africa, as well as distribution build-out investment phase and short-term impact of regulatory changes in India. In India, we expect that this upfront distribution investment will improve scale and productivity. Pan Africa showed solid VNB momentum as the region benefited from a mix shift towards higher margin product. In South Africa, the move from higher margin guaranteed annuities to market-linked products reduced margins but rather improved capital efficiency. We currently write new business at internal rate of returns of around 20%.
The performance of the Life and Health line of business continues to be consistent with our strategy of prioritizing capital efficiency, scalable growth, and sustainable returns. GI delivered earnings that were up 17%, led by South Africa, which benefited from improved underwriting margins, favorable claims experience, and higher investment returns. The premium growth was around 15%. India, on the other hand, also continued to deliver strong momentum with 27% normalized premium growth and further margin improvement. Pan Africa performance was impacted by the low corporate business volumes, a poor claims year, higher tax settlements, and the elevated claims, particularly in the fourth quarter. As part of the post JV integration control improvements, tax provisions were proactively strengthened to enhance the quality and resilience of future earnings in this business. Therefore, this has resulted in short-term pressure.
The Pan Africa GI portfolio is still establishing a consistent tax assessment and settlement cycle. As this experience develops, provisioning levels are expected to normalize. While some additional provisioning may be required, we expect that the most material impact to have been recognized this year. Despite this, the business delivered a 12% net insurance margin within target. In Pan Africa, growth was deliberately also limited on a normalized basis through the exit of loss-making businesses. India's net insurance margin improved to 24.4%, supported by disciplined underwriting and portfolio actions. Overall, GI performance remained consistent with our strategy of prioritizing capital efficiency, scalable growth, and sustainable returns. In our investment management business, earnings were up 14% on a normalized basis, supported by strong asset management fees from higher assets under management. In South Africa, we recorded higher fee income supported by strong AUM growth.
We saw good contribution from multi-manager and indexation as well as alternatives in the CIS business. Glacier rebounded strongly in fourth quarter on favorable markets. Net client cash flows rose to ZAR 67 billion, driven mainly by South Africa, with additional support from Kenya and Namibia in the Pan Africa portfolio. Following year-end, around ZAR 400 billion of assets under management were transferred to Ninety One, reshaping the earnings profile going forward toward dividends and mark-to-market gains rather than operating earnings. Like the previous lines of business, investment management's performance also reflects our strategic focus on capital efficiency, scalable growth, and sustainable returns. The credit and structuring business was up earnings 15% on a normalized basis. The loan growth in India remained very strong, with earnings impacted by deliberate branch expansion and currency effects.
Reported actual earnings are obviously impacted by the reduced shareholding, and the stronger ZAR. On a normalized basis, earnings from this business were supported by higher credit advances. This business also experienced short-term margin pressure from excess funding and costs linked to branch expansion and market visibility. In South Africa, structuring fees were strong, partly offset by higher credit provisions in adherence with IFRS as lending growth resumed. We remain satisfied with the quality of the book, and this business continues to balance growth, discipline, and investment for scale. This business also reflects our strategic focus on capital efficiency, scalable growth, and sustainable returns. This slide shows how our 2025 performance compares to our 2030 through the cycle targets on a normalized basis. Most of our core return and capital targets are already being met.
Adjusted RoGEV at 15.7% was above our risk-free plus four target. Operating profit, excluding investment variances, grew 16%, demonstrating strong underlying momentum. Solvency is comfortably within our target range. Two areas, however, are still in transition, and we are confident we will reach the through-the-cycle targets. Adjusted return on equity reflects the current investment phase and reporting volatility, and we continue to target greater than 20% through the cycle. Sustainability is now formally embedded through the sustainability index, which will evolve over time. Importantly, for 2026, we move to operating profit as the primary earnings metric while RoGEV and dividend policy remain unchanged. This slide is about confidence. Returns and capital are already delivering, and the remaining gaps are about timing, not direction.
On this slide, we explain the mechanics of our reporting transition, and we provide transparency on how 2025 performs on an operating profit basis. We start with normalized, NRFFS and bridge to operating profit, excluding investment variances after adjusting for project spend and other reconciling items. Under the new framework, operating profit is more volatile by design, as it includes both investment variances arising from writing guaranteed liabilities, as well as project expenditure that has not been pre-funded. Taking these two into account and adjusting for the AMR smoothing release, normalized operating profit, excluding investment variances, is up 16%. I spoke earlier about negative investment variances arising from the transition of IFRS 17 accounting and the anomaly in the yield curve at the very longest duration. These items gave rise to a pre-tax negative investment variance of close to ZAR 1.4 billion.
However, you will see here that the total negative investment variances were around ZAR 400 million after tax. This is because the group had a number of positive investment variances that partly offset the ZAR 1.4 billion. These included positive investment variances on assets held in South Africa to back liabilities that are equities, the impact of falling rates on negative rand reserves at both Assupol and BrightRock, and positive investment variances in the Santam portfolio arising largely from good equity market experience in Morocco. While on this slide, you will also notice that investment return on the shareholder fund reserves, including AMR, is slightly lower in 2025 than it was in 2024. This is because we reported lower average AMR balances over the year on which the returns were earned. Critically, if I remind ourselves, is that our dividend policy remains unchanged.
Project spend and accounting volatility are buffered by existing reserves, meaning that while reporting earnings may move around, cash generation and shareholder outcomes should not. We enter 2026 with a substantial buffer, asset mismatch reserve, specifically to absorb investment variances. Based on current conditions, we expect investment variances to be modestly positive, given real assets held to back some of the liabilities and margins. Although the short-term investment variances may still arise from a variety of sources. As we highlighted at our Capital Markets Day, investors should expect more volatility in reported operating profit, but stable cash generation, stable dividends, and unchanged underlying economics. The noise increases and the fundamentals should not. As we move into the new reporting framework in 2026, I also want to cover the details around investment variances arising from writing guarantee liabilities.
Investment returns on shareholder funds will be reported outside and below the operating profit line. While investment variances arising from writing guaranteed liabilities will be included in the operating profit line. These investment variances will continue to be smoothed via the AMR for dividend declaration purposes. Investment variances arise from investment activity linked to guaranteed insurance liabilities. They include both realized and unrealized gains and losses, and can therefore fluctuate meaningfully from period to period. These variances arise as a result of mismatches between assets and liabilities. Generally, we minimize these through our ALM process, but there are times when perfect matching is impossible or where we take conscious decision to run a mismatch. When Sanlam transitioned to IFRS 17 from IFRS 4 in 2023, we did not change the way in which asset backing margins were managed. We simply changed how liabilities and margins were valued.
However, during 2025, we completed the transition to IFRS 17 by changing how these assets backing the margins were valued. This slide explains how the investment variances behaved in 2025 following the conclusion of the transition of our ALM strategy, which I will explain a bit later, to suit the IFRS 17 regime. Under IFRS 4, margins were determined proportionately to the best estimate liability and were interest rate sensitive. Margins were hedged in the same way as the BEL through holding fixed rate assets with suitable durations. This eliminated investment variances. Under IFRS 17, margins behave differently from IFRS 4. The value of CSM margins is not interest rate sensitive, so it is appropriate to hold floating rate or very short duration assets. This approach eliminates investment variances in respect of the CSM margins.
The RANFR margins remain interest rate sensitive, so one can either hold fixed rate assets with suitable durations to eliminate investment variances or hold floating rate, short duration assets as the CSM margins. In this case, you then have investment variances, but the impact on capital requirements is positive because under SAM, the BEL and the assets are stressed, not the margins. Given the RANFR margins are roughly 25% of the CSM margins and that we use AMR to smooth investment variances for dividend purposes, we currently hold floating rate assets to back RAN, RANFR margins. In 2025, the change to the ALM approach for assets backing margins to align with the IFRS 17 reporting approach, that is moving from fixed rate to floating rate exposure, resulted in a reduction in capital requirements of ZAR 650 million.
Also, the partial crystallization of 2024 investment variances sitting in the AMR of ZAR 1 billion. Following the adoption of IFRS 17 in 2023, we continued to manage assets backing margins, that is CSM and RANFR, on an IFRS 4 basis, meaning they carried fixed rate interest rate exposure. This was a deliberate decision given the elevated yield environment at the time. When bond yields fell in 2024, this fixed rate exposure generated a significant unrealized gain of approximately ZAR 1.4 billion, which flowed into the AMR. As Paul mentioned earlier, Sanlam was concerned about the potential volatility from the trade tariff changes in 2025 and considered various options for de-risking the balance sheet.
In early 2025, the group changed their ALM strategy for assets backing insurance margins, transitioning from fixed rate to floating rate exposure to fully align with IFRS 17. Under the prior strategy, fixed rate exposure generated material positive investment variances in 2024 as yields declined. These gains were unrealized and accumulated in the asset mismatch reserve. The 2025 strategy change was implemented to crystallize those prior year gains, as well as to reduce investment variances from yield curve shifts and to release capital. Execution was completed during the first half of 2025, a period characterized by increased market volatility and a rise in bond yields. As yields increased by approximately 25 basis points, the residual fixed rate exposure resulted in approximately ZAR 400 million negative investment variance during the transition.
Notwithstanding this, the strategy logged in cumulative net gains of approximately ZAR 1 billion, which were transferred into the AMR and will be released through dividends over time, in line with the group's dividend framework. In addition, the change in strategy released approximately ZAR 650 million of capital, reducing solvency capital requirements and increasing financial flexibility. The key outcome that was achieved, if I may repeat, was that interest rate-driven investment variance risk has reduced and capital has been released. In the following slide, we will demonstrate how this strategy interacts with the BEL hedging effectiveness. Best estimate liabilities continue to be fully hedged to the extent that this is possible. Despite a material decline in yields during the year, the hedgeable portion of the BEL was closely matched with asset returns offsetting the increase in liabilities.
Despite a ZAR 25 billion increase in the BEL as a result of the yield curve drop, the assets moved by the same amount. There is residual exposure at the very long end of the curve, which we were unable to fully hedge. This arises from the limited bond issuances in the very longest dated South African government bonds, forcing us to hold more of the slightly shorter dated bonds. I will explain the impact of this over the last two years. Our long-dated insurance liabilities, particularly annuities and risk products, are hedged using South African government bonds. At the very long end of the curve, there has been insufficient issuance of the longest dated R2053, and as a result, parts of the exposure is practically hedged using the next longest bond, which is the R2048.
Liabilities are valued using a yield curve that is consistent with the Prudential Authority yield curve, which includes the 2053 bond without any adjustment for anomalies. One normally expects in an upward sloping yield curve for the longer-dated bond to carry a spread above the shorter-dated bond. In 2023, the R2053 bond had a spread of +45 basis points above the shorter-dated bond, and this spread can be seen in the green line in the chart. In 2024, this spread moved around, giving rise to volatile market gains, mark-to-market gains and losses each quarter is represented by the blue bars in the chart. Over 2024, the total mark-to-market position was virtually zero.
In 2025, however, the spread reduced to -16 basis points, and this gave rise to a mark-to-market loss of nearly ZAR 1 billion. In 2026 year- to- date, we have already seen the spread having narrowed, and there's therefore a gain of over ZAR 400 million in investment variances. Over time, as new bond issuances take place, one would expect that the spreads will return to their natural level and for mark-to-market losses to be reversed. This movement all takes place through our AMR, meaning that there's no impact on NRFFS nor dividend capacity. It is important to emphasize that our pricing and valuation basis for annuities, other long-dated liabilities assume conservative forward rates at the long end of the yield curve. That brings us to the end of the financial and balance sheet discussion.
We've covered the headline results, the drivers of investment return, and the deliberate ALM actions that were taken in 2025 to reduce risk, improve capital efficiency, and protect long-term value. As already mentioned, from January 2026, operating profit will be our key metric. If you look at the base for 2025, we will need to re-present to show the contribution of Ninety One to align with the shareholding changes. Before closing with the outlook, we want to remind you what the 2025 base is after adjusting for Ninety One corporate activity, as this is a reporting line shift on the face of the income statement. Earnings that were previously included in operating profit or net result from financial services for that matter, for the SIM active asset management business will no longer be included in that operating profit line.
Instead, we're going to have it in investment income, primarily through dividend income. Because Ninety One investment is also a liquid listed investment, the mark-to-market valuation will also be included in the investment surpluses. This valuation will be dependent on the Ninety One share price at period end. On a pro forma or illustrative basis, one can see that for 2025 the mark-to-market valuation would have been again, given the growth in the share price. I will close this part of the presentation with our guidance. Our through-the-cycle targets remain firmly intact, with 2026 representing the tail end of a deliberate inorganic investment phase. For the year ahead, operating profit growth is expected to be below CPI + 6%, reflecting continued investment in technology growth initiatives as well as Sanlam's internationalization.
We expect the shift towards market-linked annuities in South Africa to persist if yield levels are maintained. Together with ongoing distribution investment and the short-term impact of regulatory changes in India, this is expected to place some pressure on margins. In addition, residual stranded costs in the asset management business will weigh on performance during 2026 as these are progressively phased out with the objective of achieving a sustainable cost base by the end of 2026. Adjusted RoGEV remains within our target range, underscoring ongoing value distribution or value discipline, rather. Return on equity continues to trend upward with greater than 20% target towards 2030. Dividend growth remains aligned to our rolling three-year CPI +4 target, and solvency remains strong, positioned towards the upper end of our target range.
With the investment returns I had in the previous slide, I already explained how we currently manage and account for these. We are reviewing the floating rate exposure, ALM for assets backing the RANFR and the resulting IFRS volatility. We enter this period in 2026 with strong momentum and resilient platform. 2026 is a structural base year following significant portfolio reshaping and investment. Beyond this, we expect earnings growth to accelerate as investments mature, supporting sustainable long-term value. I thank you and I'll hand back to Paul.
Abigail, thank you very much, and I hope everybody survived the explanation of investment variances. As we conclude the presentation, I'd like to just summarize where we stand today as a group. The first thing to say is that, we've had a year characterized by geopolitical uncertainty and market volatility, of course, big currency movements. Against that backdrop, we delivered a strong set of underlying results. Our performance does demonstrate the resilience of a diversified portfolio and the strength of our core growth engines across South Africa, Pan Africa and India. We enter 2026 with strong solvency, disciplined capital allocation, and a much clearer strategic structure following the portfolio repositioning that's been taking place over the last few years. As Abigail said, 2026 will serve as a new structural base in the financials for Sanlam for two reasons.
Firstly, we'll be reporting under a new financial framework in 2026, and secondly, following years of restructuring to create a growth platform, our earnings profile become clearer, hopefully simpler to follow, and more aligned with our long-term Vision 2030 growth trajectory. The group remains very well positioned for sustainable long-term value creation for shareholders. Looking ahead into this year, we anticipate very strong continued growth in our new business, which is supported by the favorable structural growth in our key markets and continued investment in distribution capability. I believe we're going to see life insurance margins stabilizing during 2026. Although our primary focus is on the internal rate of return on any new business that we write rather than margin, because margin is a very crude measure of profitability. Ultimately, of course, profitable new business drives long-term profit growth and ROE.
In South Africa, we have improving macroeconomic conditions together with a strengthened retail mass distribution platform that should support continued activity and growth. Across SanlamAllianz business, there is an increased external focus now that restructuring is complete, combined with generally improving macro factors, so we should see continued support for new business growth. India remains a key near term growth engine following the infusion of capital into Shriram Finance, and the Shriram ecosystem continues to expand and provide significant opportunities across credit, insurance and wealth. After several years of inorganic activity and strong profit growth in 2025, we're investing very heavily in our growth factors in 2026. In South Africa, the investment into our new rewards program and banking and credit will continue through to 2027. The establishment of the Lloyd's Syndicate is another area of investment for the group.
As Abigail said, we're investing in modernizing legacy IT platforms to improve client service and migrating systems to the cloud, which is expected to deliver longer term cost benefits. As I said earlier, there will be some residual costs in 2026 following the sale of the active asset management business to Ninety One. While investment in the life insurance distribution in India continues apace. 2026 also marks a period where underwriting margins in South African general insurance and the corporate benefits business are expected to ameliorate in softening markets. A combination of higher organic investment and lower underwriting margins in South Africa is expected to result in lower profit growth in 2026 than in 2025, with this growth below our new target range.
As Abigail said, we expect return on group equity value to remain above our targets and dividend growth to meet the targets that have been set. ROE will remain below 20% in 2026, which is our longer-term target. In terms of the new future financial reporting framework that becomes operative this year, operating profit will fluctuate with investment variances in respect of the guaranteed business we write. On balance, these are expected to be modestly positive, but they're very difficult to forecast. Investment variances will continue to be smoothed for dividend purposes as in the past, meaning that operating profit volatility from these variances is not a significant factor from a dividend point of view. Against this backdrop, it's worth stressing that the global outlook is extremely worrying, and we've already seen bond and equity markets reacting sharply to recent events over the last month.
In the long run, lower inflation and rates are desirable, but Sanlam is well protected against the likely upward rate movements in the short term. Equity market levels are, of course, a key driver of the fees we earn on the assets under management. While currency movements continue to influence reported results and remain largely outside of our control. As we look ahead, we see the following significant downside risks. Continuing geopolitical tensions, especially in the Middle East, higher oil prices, inflation and interest rates, bubbles in the AI investment cycle and private credit markets, and stretched government fiscal positions and weak balance sheets. However, we are optimistic. Our markets may be affected by these factors, but we've got plenty of resilience and upside in our balance sheet. I'm gonna turn briefly just to remind you of the priorities that we have for the coming year.
The first is to make sure that in partnership with GoTyme, we launch Sanlam GoTyme as a banking services proposition and credit proposition in South Africa. We will also launch a group-wide rewards program in South Africa and further expand our branch distribution network to strengthen client relationships and cross-sell opportunities. We hope that we'll complete the SanlamAllianz integration work, including Morocco, to fully realize scale and synergy benefits. We're very focused on turning around the short term general insurance performance in Pan Africa, particularly within the SanlamAllianz corporate and reinsurance book. We will also continue to drive growth in India through the Shriram ecosystem and to operationalize the Santam syndicate at Lloyd's as we expand our international specialist insurance footprint. Finally, technology transformation remains a critical enabler.
Our ongoing cloud migration and platform modernization will support improved efficiency and lower operating costs over time. Taken together, these initiatives strongly position Sanlam to grow strongly in the next phase. Let me thank you all for your time and open up to questions. I'll hand over to Tokelo, who will marshal the questions and ask each of us to deal with them.
Thank you, Paul and Abigail, for that presentation. It was very informative. We will now check whether there are any questions from participants on the telephone line. Operator, please advise if there are any questions on the phone lines.
Thank you. We do have one question from Francois du Toit of Anchor Stockbrokers. Please go ahead.
Hi, guys. Thank you for the opportunity to ask questions. The first one I've got just relates to the project expenses that increased very sharply in the second half of the year. Can you just clarify, is all of the Lloyd's Syndicate costs included in the Santam operating results, or is there any of that included there as well? In other words, does most of that increase relate to the asset pool and other transaction costs, the Indian transaction cost as well? Just a bit of color around that and maybe guidance on what project costs you expect next year. Well, this year rather, 2026. Just a question on your very big increase in net flows in the last quarter.
It looks like certainly on the life side, it was mostly on Glacier, not very high margin business. But maybe also just a bit of color in terms of how sustainable that level of net flows you think can be. Was there any lumpy flows included in there? I guess related to that big inflow, could be the big increase in new business strain in EV statement. If you can just give a sense of how much of that big increase impacted earnings in the period as well. In other words, I guess the question relates to how much of that flow is in terms of investment contract business versus insurance contract business. Yeah, those are my two questions.
Okay. We're gonna ask Abigail to answer.
I'll cover the project expenses one, please. Francois, the project expenses, the Santam Lloyd's, yes, it is included in. If I understood your question, it is included in Santam's numbers, but it is also included in our numbers. That was one of the bigger costs or the contributors to that number. But also as Paul alluded, we incurred higher costs in as far as at the end of the year when we were finalizing the MUFG transaction with SFL that required a bit of advisory services. You can understand it being in India, as being on the side of the world, also impacted by a bit of currency as well there. We also had some costs that related to the Ninety One transaction.
Yes, a lot of the advisor costs were avoided because we're able to do a lot of that work internally. You still have legal agreements and some paperwork that needed to be done. That was the majority of the project costs this year in terms of the increase year-over-year. You also asked about what's the normalized number. I think I quoted a number of about ZAR 500 million would be a normalized project cost for the group on an unfunded basis going forward.
Mlondolozi , do you wanna deal with the strain?
Oh, the new business strain. Good afternoon. Good afternoon, Francois. It's good to speak to you again. Yeah. In the last quarter of last year, there was, as was indicated earlier, the mix change. There was quite a lot of inflows into the linked annuities, the market-linked annuities, but also flows in some of the Glacier offshore products. But in terms of the nature of those products, those will be investment contracts mainly.
Francois, you asked a question about the net line cash flows and whether that level of flow is sustainable. It's extremely difficult to say, but I personally would regard that as an outlier and an exception and would think of a much lower number being a normalized flow for the following year. I just wanna check that Mlondolozi actually answered your question, 'cause you asked about uncovered business.
Yeah.
The upfront strain.
Oh, yeah. No, no. In terms of the upfront strain on the covered business in the EV statement, given the investment contract nature of those contracts, there won't be a material impact on the strain.
There was a material impact.
There wasn't.
There was. That's what he's asking you about. What it arose from. Maybe you should take it offline.
Okay. We'll take it offline, Francois.
Francois, we'll take it offline.
Thank you.
Thank you for that. Thank you for the answers. We have a few questions here from the webcast participant. I think I'll start with Michael's questions. He asks: "Can you please clarify..." Michael Christelis from UBS, that is. "Can you please clarify why there were no economic assumption changes in your covered VIF for the sharp reduction in yields?
Good afternoon, Michael. Yeah, we can explain that, but we can explain it in more detail offline. There are two factors that one should consider. The first one is, I think you should consider the investment variances line together with the economic assumptions line when you look at our EV statement to look at the total impact of markets. The second one is that, while there was a drop in yield curves last year, material drop, there was a smaller drop in the short end of about 150 basis points. The nine-year point, it dropped by about 220 basis points. In the 20- to 30-year points, it dropped by about 200 basis points. There was a larger drop in the long end of the curve.
In some of the products where you've got positive reserves at the longer end, you had a bigger impact in terms of your liability valuations. Also in terms of when you look at your assets, when you look at the end rate that you're going to earn, you had lower forward rates on those assets, and you're discounting them at a higher discount rate. There wasn't just a change in the level, but you are discounting those later cash flows where earning slightly lower returns on the assets, making slightly higher liabilities at a higher discount rate. That had the impact of moderating what one would have expected from economic assumption changes. That's the impact of the economic assumption changes. Then on the investment variances is the factor that I explained earlier on.
I can provide you a lot more detail offline.
With that, I'm gonna pause a little bit on the webcast and go back to the telephone line operator. Are there any more questions?
Thank you, ma'am. There are no further questions on the telephone lines.
Thank you, operator. Coming back to the webcast. We've got a question here from Senamile Maveve from SBG Securities, and he asks, "Management has highlighted an 11% decline in VNB, largely attributable to client shifts from towards living annuities. Given that these are structurally lower margin products, to what extent is this a permanent resetting of Sanlam's margin profile? How do you plan to offset the margin squeeze if bond yields continue to be volatile and discourage a return to guaranteed products?" I'm gonna lump that with Michael's question, who asks about more context around annuity mix in South Africa and what our level of guaranteed and living annuity is.
Okay. I mean, I'll give you some high level comments, and then Mlondolozi might want to fill in the detail. When you talk about low and high margin products, immediate annuities are high margin from a life VNB point of view. Living annuities still run very good margins, and of course, you don't have capital sitting in behind them. You're actually comparing apples and pears. You gotta be very careful. In terms of, you know, the mix. The mix between immediate annuities and living annuities will always be a function of interest rates and relative attractiveness of equity markets. If interest rates are very high, long bond yields are very high, and equity markets are unattractive, you'll get very heavy flows into immediate annuities, and of course, the reverse is true.
At Sanlam, we never ever try to influence where our clients put their business. We let them put it where it's best for the client. It's very difficult to stipulate what a normal level of difference between immediate annuity and living annuity is. I don't know, Mlondolozi , whether you want to fill in anything in terms of the underlying economics.
Yeah. No, I think, I mean, just maybe to add to that is, you know, given where the yields have shifted, I mean, that mix was, say, 60/40, being living annuities to life annuities, and is now closer to 70/30 being living annuities 70 and life annuities 30. Importantly, last year, our total volumes across both living annuities and life annuities were up 8%. Despite the fact that there was just a shift in the mix, we've got compelling value propositions for both products. We're able to ride the interest rate cycle depending on what is in demand in the market. That's all I would like to add.
Okay.
I see Anton is now up on screen. Anton, can I assume you want to add to this?
Yeah. Thanks. The only thing I'd like to add is that pre-COVID, the mix that Mlondolozi referred to was around 75/25. We're currently very close to the pre-COVID mix. Maybe we are getting close to the bottoming out in terms of that mix.
The next question is from Marius Strydom from ALG. He firstly says, "Congratulations on the 2025 result," and he thanks us for the enhanced disclosure. Marius asks if we can please provide an estimate of our SCR cover level once the Indian transaction or any other outstanding transactions are concluded. Do we consider our current SCR as more conservative? Taking this into account, what would the technical impact of lower bond yields be?
We need to ask Mlondolozi because if you asked Abigail and I think this would be quite tricky for us.
I think, yeah. Thanks. Good afternoon. Hi, Marius. Good to speak to you again. I mean, we do have a target range of 150%-190%, and we do intend to operate within that target range over time. You asked specifically about the impact of the India transaction, it will be about 7% reduction on that rate. It will bring it to about 176%, and that will still be a comfortable level for us. A 1% drop in yield reduces our coverage rate by about between 3%-4%. We have looked at our solvency level and our range of stresses, and it's very resilient to changes in market factors, including yields and equities.
For interest rates, 100 basis points would be about a 4% drop in the solvency level, but will remain within target levels.
Mlondolozi , I don't wanna complicate your life.
Yeah.
It might be worth reminding people that it isn't just yield levels.
Yes.
Something like the difference in the spread between the 2053 and the 2048.
Yeah.
Will also feed through into solvency.
Yeah.
You might sit at exactly the same yield level.
Correct.
If that spread moves, Marius, that will also feed through into solvency. Don't ask me to quote for every one basis point.
Yeah.
What it is, but you probably know the answer.
Yeah. We've got an answer for that.
Right.
A 10 basis points change in that point of the curve would drop the solvency level by about 1.5%-2%. If the level stays the same, that's the kind of impact you'd get on the solvency position.
We've got a question from Warwick Bam from RMB Morgan Stanley. He points out that covered business had a great period, but do we think that persistency experience is macro-related or a function of management actions?
That's a very good question. The answer, of course, Warwick, is it's both. There's no question that in our case, we believe that the majority of the delta comes from management actions. I think we've spoken at some length about these. It's particularly pertinent in the retail mass market, where in changing our own commission system, we made a big difference to the churn rate and the persistency in our book. When we took Assupol on, we were able to cut out the churn between those two books as well as cutting it. There is no question that at the margin, it does also help with the macroeconomic situation improving does help.
Of course, this is one of the reasons that we're so nervous about the impacts of a prolonged conflict in the Middle East, because that'll put, again, upward pressure on inflation and interest rates and put pressure back on the consumers. You know, I wouldn't be precise, but my guess is that 90% of the change came from management actions, 80%-90%, and the rest from improving macro.
We've got a question from Faizan Lakhani of HSBC. He says, looking at your cash generation slide, your remittance ratio has fallen from 67% to 61%. Can you explain what drove that? In conjunction, when I look at the cash flow, the cash available for dividend had to be topped up with funds from discretionary capital. Help me understand why your payout ratio is still one, and if this is sustainable.
We can ask Abigail to deal with this, but I would remind people that we have signaled that with the formation of the SanlamAllianz joint venture, that the corporate structure results in a damming up of dividends for a period of years. We always knew that there was going to be a heavier retention in that business for a period of time, which is why you see the cash retained. It'll come out later, and it's because you have this. It's like the Russian dolls. There are holding companies and you have to wait a whole cycle to move the dividend up. This is something that we will streamline over time. That's one of the big reasons.
Of course, the other thing to remind Faizan is, and I think some of the people who've been following us a bit longer know this, is that some of the structures in India have also been trapping dividends. A lot of that will unlock now as well going forward. We've underdeclared dividends, relative to the cash sent up by about ZAR 1 billion over the last four years. But Abigail, you want to fill in the-
Yeah. You've covered it.
Oh, sorry. Go on.
Yeah. We've underdeclared since 2021 by approximately ZAR 1 billion. Yes, we did top up from discretionary. We do that occasionally. Last year, we actually underdeclared, so it's over a period of time. In terms of the cover ratio, our cover ratio, because we're still in the current reporting framework, is really a percentage of a net result from financial services that has been uplifted from the underlying operations. What we're saying with that cover ratio, when we say it's one time, we're saying everything that was generated and remitted to the group. It actually works out to about it's a point something, but it rounds up to one. I think that was. The rest you've covered.
Okay.
Senamile Maveve again from SBG Securities asked about investment variances and why the ALM strategy was unable to immunize us from the bottom line, particularly given the specific duration gaps.
Hi. Good afternoon, Senamile. As we explained in the slides, the ALM has got practical constraints at the long end of the curve. In the part of the curve where there are no practical constraints, our ALM, as we demonstrated, worked effectively despite the volatile yield movements in the earlier part of the year, and the steep decline in the last half, particularly the last quarter of the year, where we had the largest movement for a quarter. The challenge that we had was in the long end of the yield curve, where there is insufficient long-dated bonds, and that has meant that our ALM was couldn't be perfect. It's practically impossible to be perfect.
Mm-hmm.
There is insufficient supply of the longest dated bond being the R2053, and therefore we have to cross-hedge that position. We have got a very efficient ways of managing that cross-hedging, but it is exposed to certain movements in that part of the yield curve. It so happened that last year, the government slowed down the issuance of that longest dated bond, in an environment where there had been increased demand from all the risk and annuity sales that have been sold by the life insurance industry. That further push and squeeze on that end of the curve, which meant that there was an unrealized loss, as we showed in the slides. What we've experienced is not an ALM problem.
It's a structural problem in the government bond yield caused by demand and supply dynamics. It is not an unexpected occurrence. Whenever you have a new longer dated bond getting issued, it takes a bit of time for there to be sufficient issuance and things normalize after that. That's why we expect that this will normalize as well and the price then will pull to par and we'll be able to to continue with more stable results at that long end of the curve. It's not an ALM problem. It's a practical market constraint problem.
The R2053, Sanlam alone would require something like 70% of the total issuance, right?
Yes.
When you think of it that way, you can appreciate that there are other people who also would like it. There just isn't enough to go around.
That is correct.
When you think of it in scale terms, it's a very significant problem.
Mm-hmm.
It's one we've seen every few years repeat itself, and it washes out.
Ladies and gentlemen, I think with that, it kind of concludes our time. There are a few questions that are still on the webcast. We will reach out to you and answer these. We also are gonna see a few of you during our roadshows as well as our analyst meetings tomorrow. We will cover these questions then. With that, again, I want to just thank Paul, Abigail, and Mlondolozi for your time, for a very insightful session, and we look forward to 2026.
Thanks, Tokelo.
Thank you.