Sanlam Ltd., the largest South African-based insurer, said prospects for its domestic business will remain muted for the rest of this year and into 2018 as political uncertainty knocks confidence and markets.
Political and economic policy uncertainty is “not likely to dissipate” before the African National Congress elects a new leader in December, the Cape Town-based insurer said in a statement on Thursday. “Until policy certainty returns, low business and investor confidence will prevail. The risk of further downgrades to South Africa’s sovereign credit ratings must be recognized.”
Against these headwinds, Sanlam’s first-half new business volumes decreased 4 percent to 110 billion rand, while net fund inflows dropped 13 percent, it said in the statement. Normalized attributable earnings climbed 14 percent to 4.78 billion rand ($373 million).
Sanlam bought stakes in South African insurer BrightRock Holdings Ltd., Kenya’s PineBridge Investments, the U.K.’s Tavistock Financial Ltd. and Zimbabwe’s Zimnat this year, while selling its holdings in Enterprise Group Ltd. in Ghana.
Operations in developed and emerging markets have helped the insurer diversify away from its home market where growth is at its most sluggish in eight years and political turmoil has roiled markets. S&P Global Ratings and Fitch Ratings Ltd. cut the nation’s international debt to junk in April after President Jacob Zuma fired Pravin Gordhan as finance minister and replaced him with Malusi Gigaba, who has no financial experience.
“Prospects for South Africa will remain muted for the remainder of 2017 and 2018,” Sanlam said in the statement. “Growth prospects outside of South Africa remain more positive with the improvement in economic conditions likely to persist in the medium term across most regions where we operate.”