Local proved better for Sanlam

2011-08-06 00:00

FOR many years, South Africa’s two biggest insurance companies, Old Mutual and Sanlam, have invited comparison. Both have rich histories, both exerted enormous influence over the economy during the second half of the 20th century, and both entered a new phase a little over 10 years ago when they became public companies.

Sanlam demutualised in 1998, shortly before its primary competitor. However, the two followed distinctly different paths after their listings. While Old Mutual targeted international expansion, Sanlam focused mainly on its local business and providing a greater range of financial products and services to the South African population.

Sanlam’s only significant international acquisition was the 2003 purchase of Merchant Investors, a life-insurance and asset management business in the United Kingdom. The group does, however, also have smaller interests in the United States, the UK, Europe, India, Australia and sub-Saharan Africa.

The likely outcome of these different paths was far from evident at the time, but the last few years have revealed much. While Old Mutual became mired in international troubles and suffered enormous write-downs as a result, Sanlam stood firm.

“Sanlam has proved to be the better bet by staying local,” says Efficient Select’s chief investment officer Brendan Vadas. “Sanlam has done better over time because they stuck to what they knew.”

Although Sanlam was not entirely unaffected by the acquisition bug that bites businesses receiving massive cash windfalls after listing, the new management installed in 2003 has made a point of settling things down. The principal focus for the group has been to focus on the basics of doing what they do well and growing margins.

— Moneyweb.

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