Background and overview of Sanlam (SLM)
The Corporate Office of the Sanlam Group is responsible for centralised functions that include strategic direction, Group financial and risk management, Group marketing and communications, Group human resources and information technology, Group sustainability management, corporate social investment and general Group services.
In addition, the Sanlam Group operations are managed through four operating clusters:
In addition, the Sanlam Group operations are managed through four operating clusters:
- Sanlam Personal Finance
- Sanlam Emerging Markets
- Sanlam Investments
- Santam
Scroll over or click on the funnel chart to get more details of SLMs latest financial results
Financial review:
Sanlam as an insurance company is a little more complicated to value than just looking at its earnings and cash generating capabilities. A measure of the value of insurance companies is called "Equity Value". According to Sanlam's last set of annual results their group equity value amounted to R46.84 per share. While this a a good guide as to the value of all Sanlams investments minus all debt, insurance companies to tend to trade at premium's to their reported Equity Value. Part of the reason for this is new business coming in (on which premiums are earned, and with which the insurance companies then reinvest in the markets for potential better returns).
Looking at SLM's equity value value, the bulk of of their equity value comes from the their Personal Finance division, which accounts for just over 40% of SLM's equity value. The graphic below shows the contributions of their various divisions to their equity value. The graph is interactive. If you click on any of the division within the pie chart it will shoot out of the pie chart, if you click on the description of the division the graph will either remove or add that division back to the pie chart. If one division is added or removed (it recalculates the contributions and shows it in the brackets).
Looking at SLM's equity value value, the bulk of of their equity value comes from the their Personal Finance division, which accounts for just over 40% of SLM's equity value. The graphic below shows the contributions of their various divisions to their equity value. The graph is interactive. If you click on any of the division within the pie chart it will shoot out of the pie chart, if you click on the description of the division the graph will either remove or add that division back to the pie chart. If one division is added or removed (it recalculates the contributions and shows it in the brackets).
From the above analysis its easy to see that SLM's various divisions all contribute significantly to their overall equity value. The main contributor to this is their Personal Finance division. This division provides financial services (Insurance, estate services, investments, personal loans etc to individuals and the business owner markets. This division generates vasts amount of recurring earnings (I.e money being paid in insurance premiums every month and small fees charged on say debt order unit trust investments every month). This is money that is earned regardless of the performance of stock markets world wide.
While increasing stock market prices, does lead to greater fees earned by SLM and a higher group equity value, the market movements are not the sole determinant of SLM's value and/or profits.
While increasing stock market prices, does lead to greater fees earned by SLM and a higher group equity value, the market movements are not the sole determinant of SLM's value and/or profits.
Valuation
While SLM's fortunes and equity value is largely dependent on the movements of the stock market, there is a large part of their business that makes money off premiums (these premiums are then invested to seek returns on these). The recurring nature of these premiums and the fact that new business is still flowing into SLM, one should look past short term stock market movements when valuing insurance companies. With SLM's strong foothold in South Africa, and exposure to emerging markets, we feel SLM offers great value at current prices based on their financial results. We value the business between R71.50 ad R72 a share.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question.