Sanlam, South Africa’s largest insurer, expects operating profit in its India businesses to grow by at least 10% in real terms through to 2030 as the group scales up its operations in one of the world’s fastest-growing economies.
Speaking to the Business Times this week, CFO Abigail Mukhuba said India was the group’s growth engine given its strong economic growth.
“Our business in India is aiming to grow operating profit by South African CPI [consumer price index] plus 10% going forward. That should give you an indication of just what opportunities there are in the Indian market in terms of growth. There are high opportunities.”
Sanlam began operating in India through a joint venture with the Shriram Group two decades ago, offering loans to SMEs looking to purchase two-wheel vehicles in rural areas, as well as general and life insurance.
Shriram Finance, a top provider of finance for pre-owned commercial vehicles and two-wheelers, has a loan book of around R550bn, and nearly 10-million customers.
In June, in partnership with Shriram, Sanlam expanded the asset and management business, targeting ultra-high-net-worth individuals, marking growth beyond credit and insurance.
“What has driven that is we have seen growth in the average life of an Indian entrepreneur. They would have started their businesses with a two-wheeler by doing deliveries between one town and the other,” said Mukhuba.
“Those entrepreneurs are becoming millionaires who own businesses. Their LSMs are moving up, and you want to make sure you continue to be relevant to them; otherwise, they will go elsewhere for their asset and wealth management. We are positioning ourselves to be in that market as well.”
Those entrepreneurs are becoming millionaires who own businesses. Their LSMs are moving up, and you want to make sure you continue to be relevant to them; otherwise, they will go elsewhere for their asset and wealth management. We are positioning ourselves to be in that market as well.
Speaking during the capital markets day a week earlier, the executive head of strategy, David Marshall, said the Indian e-asset management and wealth management businesses had potential.
“We expect industry assets under management (AUM) in India to double by 2030, driven by the increasing adoption of systematic investment plans, which are becoming a backbone of retail investment flows in India. These involve a recurring monthly contribution, so a lot like unit trusts. We have so far recruited 140 wealth management professionals in 11 cities,” he said.
Sanlam last week announced plans to improve its return on equity and cash generation. Marshall said they had grown the equity value of Sanlam’s India interest from R10bn in 2020 to more than R25bn in 2024.
He expects ongoing growth in the loan book through to 2030 to be more or less consistent with the past five years, as it’s been growing at around 15% to 16% per annum.
In general insurance, Sanlam expects new business volume growth at 15% to 20% through to 2030, and in life insurance, a bit faster at 20% to 25%.
Marshall said the growth fundamentals in India were a huge plus for Sanlam. “It’s one of the fastest-growing economies in the world, projected to be the second-largest on the planet by 2050, if not earlier, with a massive and youthful population, while most other regions in the world are ageing... with GDP growth of over 6% per annum,” he said.
“Or, if you prefer more tangible metrics, consider that we have about 11-million vehicles on the roads in the whole of South Africa today, whereas in India, there are over 300-million vehicles.”
He said India’s true potential lies in its rural areas, where about two-thirds of the population resides. “That’s over 900-million people, the equivalent of the entire sub-Saharan Africa population. It is also the fastest-growing segment of the market, outpacing that of urban areas.”
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