Allianz Joint Venture Reinforces Sanlam’s Africa Strategy, Says Fitch
Sanlam Limited’s proposed joint-venture partnership with Allianz SE – an insurer with financial strength rated AA with a stable outlook – underscores Sanlam’s position as the largest African insurance and savings group, Fitch Ratings says.
The global rating agency said it expects the impact of the deal will likely be neutral to the ratings of South Africa-based Sanlam and its core operating entities. The insurer’s post-transaction economic exposure will remain broadly unchanged on day one of the joint ventures, with limited scale benefits and other synergies realised over the first year.
“Beyond our two-year rating horizon, Fitch believes that the new joint venture could gradually generate meaningful operational synergies and economies of scale. The entity creates the potential for new business combinations in some individual markets.
“In addition, the JV will provide Sanlam with access to new markets, notably Egypt, thereby marginally improving the group’s overall diversification.
“However, we expect the South African market to remain Sanlam’s main profit contributor and balance sheet exposure on a look-through basis. Sanlam South Africa’s contribution was around 71% of net operating profits from financial services in 2021 (2020: 68%)”.
Sanlam announced the partnership with Allianz SE, which will combine their operations across 29 African markets outside South Africa, on 4 May. Allianz will contribute all its African assets in exchange for a stake in the JV.
Sanlam will retain a 60% controlling share of the joint entity. The proposed transaction is pending various regulatory approvals and Sanlam expects the deal to conclude around 12–15 months from the announcement.
The JV is not a cash deal, and Fitch expects its assessment of Sanlam’s capital to remain broadly stable. READ: FBN Holdings Completes Sale of Insurance to Sanlam
“The group posted a statutory solvency assessment and management cover ratio of 173% at the end-2021 (2020: 186%) and we expect the ratio to remain above 170% over the medium term”, Fitch said. #Allianz Joint Venture Reinforces Sanlam’s Africa Strategy, Says Fitch
