By Nqobile Dludla
JOHANNESBURG (Reuters) – Sanlam, South Africa’s biggest life insurer, said on Thursday it expects a modest outflow from retirement funds in the short term as clients are allowed to withdraw savings under new pension rules which came into force this month.
New legislation allows South African pension scheme members to access a small portion of their fund savings for emergency purposes before retirement.
“Within the corporate market, certainly lower-income employees, we’ve seen a massive, really huge demand for people to try to withdraw savings,” Chief Executive Paul Hanratty told Reuters, adding that the insurer’s systems have “stood up well”.
But Sanlam’s wealthier and high-income clients have shown no interest in withdrawing from their pension, he said, after the life group reported a 40% surge in half-year profit.
“In the corporate business, in the short run, you’re going to see a negative impact with assets leaving, that obviously hits your net client cash flow, and you lose the ability to earn an income on those assets,” he said.
But outflows are expected to be modest, with improved asset accumulation in the long term, Hanratty said, as the new system forces members to keep most of their pension unlike previously when some people withdrew it all when leaving an employer.
Sanlam, which is in 31 countries across Africa and Asia, particularly India, said headline earnings per share rose to 473 cents in the six months to June 30.
Total net client cash flow – which measures cash inflow such as premiums and investment income, and outflow such as claims paid – more than doubled to 23.9 billion rand, with all lines of business recording positive net inflow, it said.
Total new business volumes grew 7% to 204 billion rand, with growth underpinned by life insurance operations.
Its net result from financial services (NRFFS), which it considers a more accurate measure of profitability, grew by 14% to 7.1 billion rand ($398 million), reflecting strong trading performances across its businesses.
Its life and health insurance operations grew NRFFS by 14% and general insurance rose 16%.
($1 = 17.8587 rand)
(Reporting by Nqobile Dludla and Tannur Anders; Editing by David Goodman, Jacqueline Wong and Alexander Smith)
