When Sanlam reported its 2019 financial results a year ago it was one of the last of the old-style physical results presentations - and already the shadow of the Covid pandemic loomed.
Members of the audience were handed hand-sanitisers as they went into the Sanlam auditorium in Sandton. And the finance director revealed that the group just so happened to have a pandemic reserve in place, which it had set aside over a period of several years.
A year later and SA's life assurance industry has recorded 116,774 more death claims in 2020 than it did in 2019, an increase of 37%, the Association for Savings and Investment SA (Asisa) reported this week.
This suggests real Covid mortality is closer to the almost 150,000 excess deaths estimated by the Medical Research Council than the 50,000 officially reported Covid deaths.
At Sanlam, that R760m pandemic reserve stood the group in good stead, enabling it to pay out on the net R399m of mortality claims where Covid-19 was indicated as the cause of death - out of a total of more than R500m more in mortality claims than usual - without taking nearly as much of a hit to its profits as did some of its competitors.
But Covid's worst is by no means over, as Sanlam CEO Paul Hanratty warned at the release of the group's 2020 year-end results on Thursday.
Sanlam expects excess claims in 2021 will likely be two to three times the level of 2020, as the impact of the second and subsequent waves of Covid infection filter through, Hanratty said.
That's already indicated from the experience of the second wave, which peaked in January/February this year and saw mortality claims that were 50%-60% higher than at the peak of the first wave in June/July last year.
Most striking was that unlike the first wave, the second wave hit Sanlam's "retail affluent" segment particularly hard.
We’ve got to
— Paul Hanratty: Sanlam CEO
assume there will be
further waves this year
The group's take on the Covid trend ties with research published this week by the National Institute for Communicable Diseases (NICD), which reported there was a 20% increased risk of in-hospital mortality in the second wave, "which could possibly be related to the new variant".
Said Hanratty in an interview: "We used some of the pandemic reserve for 2020 and no doubt we will use more for 2021. We've got to assume there will be further waves this year."
Good work is being done by business and the government to get the vaccine rollout going. But the group doesn't believe it will solve the problem in 2021, with the impact of Covid likely to persist into 2022.
"I am not saying we couldn't have done better - but South Africa is not the only place in the world that's behind the curve. And while the vaccine is a very important tool, it's not a silver bullet," Hanratty said.
But Sanlam's solid results for the year to end-December were far from being all bad news. The net result from financial services - the group's key measure of operating performance - was down 13%, though it would have been up 17% without the impact of Covid on its businesses. Net operational earnings declined 23% but increased by 14% excluding Covid's impact.
New business volumes rose 25% to more than R300bn, despite tough restrictions during the hard lockdown in the second quarter.
Investment flows were extremely strong, with investment business increasing by 37%.
Hanratty said these flows had been assisted by the anticipation of the enhanced black empowerment credentials of Sanlam's asset management business, which brought in some big mandates.
The year saw the completion of the transaction in which Patrice Motsepe's Ubuntu-Botho/African Rainbow Capital acquired 25% of Sanlam's third-party asset management business.
Sanlam in turn acquires 25% of ARC, giving it exposure to health and financial services businesses including Afrocentric and Alexander Forbes.
Hanratty said the group's new strategy delivered some tangible results, with growth in its African businesses, in line with its strategy to become an African champion, as well a strengthening of its businesses in SA and a real step up in digital transformation.
Its balance sheet remains strong with a solvency ratio of 191% (down from 210% in 2019), which is well above the regulatory minimum and at the upper end of the group's target range. And though Hanratty said it is difficult to give guidance on the outlook for 2021, because of uncertainty about mortality and business-interruption claims, it reckons it has sufficient reserves.
Old Mutual, which reports its year-end results on March 23, said in a trading statement this week that it had raised a R1.3bn short-term provision in the first half of last year for the anticipated impacts of worsening mortality, morbidity and persistency related to Covid-19. However, it has had to increase this by R3.9bn.
Said Old Mutual: "Actual claims in the second half of the year were higher than the provision . with an acceleration in infection and excess mortality rates at the end of the fourth quarter . There are also emerging expectations of a third wave given evidence of virus mutation, the slow pace of the vaccination rollout and upcoming public holidays and the winter season."
Liberty, which reported a loss for the year, also raised a provision in the first half of the year that proved to fall short of actual Covid claims.
The swiftness with which SA's life assurers have paid out on death claims is in contrast to the fierce contestation over the business interruption claims that SA's leading short-term insurers - including Sanlam subsidiary Santam - refused to pay out, prompting their beleaguered clients in industries such as restaurants and tourism to take them to court, where judgments have gone against the insurers.
Santam, which is still negotiating with clients over the size of the claims, has paid out R1.3bn and provided R3bn in total.
SA's life insurers paid out a total of R31.7bn more last year than in 2019.
