Sanlam’s 2025 results landed during an unusual macro-economic moment for South Africa.
Late in the year, the rand strengthened sharply, buoyed by improved investor sentiment, strong commodity prices, and rising gold sales. For many companies, that shift would normally be positive.
For Sanlam, however, the opposite occurred.
The financial services group reported that the stronger rand – together with currency hedges linked to its expanding operations in India – reduced the value of its foreign assets and produced accounting losses that weighed on headline earnings.
The result was a set of financials that revealed a striking contrast: record new business volumes and strong operational growth on the one hand, but weaker headline metrics that unsettled investors on the other.
Executives outlined several factors behind this divergence, ranging from currency movements and bond market distortions to reinsurance losses in Africa and elevated investment spending linked to the group’s long-term growth strategy.
Taken together, these factors help to explain why Sanlam’s headline earnings weakened even as much of the underlying business continued to expand.
India expansion, currency effects and hedging decisions
A significant influence on the results was Sanlam’s expanding presence in India, which has become one of the group’s most important long-term growth markets.
The group has steadily increased its exposure to the Shriram financial services ecosystem, which includes Shriram Life Insurance, Shriram General Insurance, and Shriram Finance.
During the year, Sanlam received regulatory approval to increase its shareholdings in the insurance businesses, deepening its participation in the Indian market. As part of the broader strategy, Sanlam and Shriram also introduced Mitsubishi UFJ Financial Group (MUFG) as a 20% shareholder in Shriram Finance, injecting more than $4 billion of capital to support future growth.
Management expects the expanded ecosystem – combining credit, insurance, and distribution – to create significant long-term growth opportunities, although the expansion has also created short-term pressure on earnings.
Group chief executive Paul Hanratty told the results presentation that the life insurance business in India has faced operating losses due to aggressive distribution expansion and several regulatory changes, although profitability is expected to improve as the business scales.
Chief financial officer Abigail Mukhuba added that earnings from India were also affected by branch expansion costs and currency movements, even though underlying loan growth in the credit business remained strong.
Currency movements were one of the largest drivers of the weaker headline metrics for the group overall.
The sharp strengthening of the rand in late 2025, particularly against the US dollar and the Indian rupee, reduced the value of Sanlam’s foreign assets when translated back into rands. Because roughly half of the group’s shareholder investment assets are held outside South Africa, these translation effects had a significant impact on reported investment returns.
“Net investment returns reduced to R1.9bn compared to R3.5bn in 2024 and this decline was not driven by weaker asset performance,” Mukhuba said.
Currency hedging decisions linked to the Indian transactions also contributed. Because increases in Sanlam’s shareholdings in Shriram Life and Shriram General Insurance required regulatory approval, the group hedged the purchase price against the risk that the rand might weaken before the deals were finalised. When the rand instead strengthened, the hedge generated accounting losses.
The insurance transactions received regulatory approval and were completed shortly after the financial year-end. The hedge has therefore been closed, and the larger shareholdings are expected to begin contributing to earnings as the businesses grow.
Hanratty said the currency movements created a large swing in reported investment returns even though the underlying investment portfolios performed well in local-currency terms.
Additional foreign exchange losses were also recorded elsewhere in the group.
Santam held significant US dollar deposits ahead of the launch of the Santam Syndicate 1918 at Lloyd’s of London, an international underwriting platform that allows the insurer to write specialised risks in global markets. The syndicate officially began operations on 1 January 2026 and has already started underwriting risks, although its financial contribution is expected to build gradually as the book expands.
Government bonds and investment variances
Currency movements were not the only market-related factor affecting the results. Bond market dynamics also played an important role in the weaker headline metrics.
Sanlam reported that an anomaly in yields on the longest-dated South African government bonds emerged during 2025 because of shortages of bonds with very long maturities. These distortions created negative investment variances in the group’s financial statements, although the losses are unrealised and expected to unwind as market liquidity normalises.
During the results presentation and Q&A session, management said the issue was not a failure of Sanlam’s asset liability management strategy but rather a structural constraint in the South African bond market.
Chief actuary Mlondolozi Mahlangeni explained that insurers rely heavily on long-dated government bonds to match the duration of liabilities arising from annuity and risk products. However, there is limited supply of bonds with maturities beyond 20 or 30 years. As a result, insurers often need to cross-hedge liabilities using other instruments or shorter-dated bonds, leaving them exposed to distortions at the far end of the yield curve.
In 2025, the problem intensified because issuance of the longest-dated bond slowed while demand from insurers increased. This created a shortage that pushed prices higher and yields lower, generating unrealised accounting losses for insurers that rely on these bonds to match liabilities.
Mahlangeni said although Sanlam’s asset liability management strategy works effectively across most of the yield curve, it becomes difficult to achieve perfect matching at the very long end of the market.
Hanratty illustrated the constraint by noting that Sanlam alone would require a very large share of total issuance of the longest-dated government bond to fully match its liabilities, making perfect hedging practically impossible.
The situation is not unusual in markets with limited long-dated bond supply. Management said similar distortions have occurred periodically and tend to normalise as new bonds are issued and liquidity improves.
As a result, Sanlam expects the negative investment variances recorded during 2025 to gradually reverse over time as the bonds approach maturity and the yield curve normalises.
Problems in SanlamAllianz Re
Alongside these market-related factors, operational challenges in the group’s pan-African reinsurance business also weighed on the results.
Performance in the SanlamAllianz joint venture’s general insurance operations – particularly the reinsurance arm, SanlamAllianz Re – deteriorated during the year and contributed to weaker headline earnings in the second half.
Hanratty said although growth and operating performance in the pan-African life insurance business remained strong, the general insurance segment delivered a disappointing outcome.
Earnings were negatively affected by adverse tax assessments, higher tax provisions, and significantly elevated corporate claims in the reinsurance portfolio.
Mukhuba said profitability in the pan-African general insurance operations was further pressured by higher tax settlements and provisioning, as well as a spike in mid-sized corporate claims, particularly within SanlamAllianz Re.
Some of the provisioning was linked to efforts to strengthen earnings quality following the integration of Sanlam and Allianz’s African insurance operations. As part of the process, the group has tightened governance, tax provisioning, and risk controls across the business.
Despite the pressures, Mukhuba said the pan-African general insurance portfolio produced a net insurance margin of about 12%, which remains within the group’s target range, although lower than the previous year.
Management says the problems are being addressed.
Hanratty said a new senior management team from Allianz in Germany has been brought in to stabilise the reinsurance operation, focusing on improving underwriting discipline, strengthening claims reporting and restructuring the reinsurance programme.
However, he cautioned that the turnaround would take time to feed through into financial results. Because insurance portfolios renew gradually, the benefits of stricter underwriting and revised reinsurance structures will only become visible as existing contracts are replaced with new business written under the updated standards.
Management expects these measures gradually to normalise performance in the reinsurance portfolio, allowing the broader SanlamAllianz platform to refocus on growth opportunities across the African insurance market.
Strategic investments weighing on earnings
Beyond market effects and operational issues, the results were influenced by the group’s current investment and restructuring phase, which has temporarily increased costs and weighed on headline earnings.
Over the past several years, Sanlam has been reshaping its portfolio to focus on higher-growth emerging markets and scalable financial platforms. This repositioning has involved several major transactions, including the creation of the SanlamAllianz joint venture, the acquisition and integration of Assupol in South Africa, the restructuring of its asset management business through the Ninety One transaction, and increased investment in the Shriram financial services ecosystem in India.
Hanratty said the repositioning has simplified the group’s structure and strengthened its exposure to faster-growing markets, creating a platform that management expects to support stronger earnings growth in the years ahead.
However, executing these transactions has required significant upfront spending.
Project expenses rose during the year as Sanlam incurred advisory, legal and implementation costs linked to several strategic initiatives. These included finalising the Shriram-MUFG transaction and completing the operational work required to establish the Santam Syndicate 1918.
Additional costs were also incurred as Sanlam integrated the Assupol business into its South African retail mass-market platform and completed restructuring activities linked to the SanlamAllianz partnership.
Mukhuba said many of these costs are deliberate investments in future growth platforms and should therefore be viewed in the context of the group’s longer-term strategy.
She indicated that business-as-usual project expenditure typically amounts to about R500 million a year, and project spending is expected to gradually normalise towards that level once the current wave of strategic initiatives has been completed.
Several of the transactions executed in 2025 are also expected to unlock value only in future reporting periods. For example, the Shriram-MUFG transaction and the restructuring of the Ninety One relationship are expected to contribute more meaningfully to group equity value and earnings from 2026 onwards.
In that sense, management views the elevated project costs recorded during 2025 as part of a transition phase during which Sanlam is investing in platforms expected to drive stronger growth and returns over the longer term.
