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South Africa's Largest Insurer Sees Escape Valve in India

Sanlam is the dominant insurer in South Africa with revenues of $4.6 billion in 2022, 25% of which derived from international operations. Most of the international operations come from Africa, but it also sells insurance in North America, Australia, and other markets. It entered India in 2005 and in 2015 invested significantly to acquire 51% of the Indian joint venture. As South Africa continues to deteriorate look for more companies to seek growth in countries that can at least keep the lights on.

Sanlam Ltd. is Africa's largest insurer controlling roughly 7% of South Africa's insurance market and generating revenues of around $4.6 billion. It was founded in 1918 and made its first investments outside of South Africa in 1928 into South West Africa, now Namibia. Today the company operates in over 30 countries in Africa and this is where it earns most of its international revenues.

India's $3.4 trillion economy boasts almost five times the growth rate of South Africa's, while its insurance penetration rate of 6% pales in comparison to South Africa's mature 17%. India's insurance penetration is low due to poor financial literacy among some groups, cultural aversions, lack of distribution channels including brick-and-mortar sales channels, and that most existing insurance products cater to wealthier urban segments ignoring the more vulnerable and poorer in the rural areas. Regulatory frameworks in India are often not conducive to providing insurance products owing to complex tax structures adding layers of complexity and costs.

South Africa, in contrast, offers a more fertile ground for insurance, because it has developed financial infrastructure with widespread access to banks and other distribution channels already in place. The country has a higher financial literacy rate and boasts one of the top banking sectors in the world. The country's tax and regulatory structures encourage the selling and buying of insurance products.

Despite the current disparity, India's potential remains undeniable. It has a rapidly growing middle class which currently sits at 60 million and is projected to triple within a decade. Disposable incomes are rising rapidly and the number of Indians earning $10,000 per year has doubled to 60 million in the past nine years. These favorable trends are why firms such as Walmart and Blackrock are also expanding operations in the Asian nation.

"India is a transformational market, and we remain deeply committed to its long-term potential. This $10 billion investment underscores our confidence in the Indian consumer and our unwavering dedication to serving them better. We will leverage this investment to enhance our online offerings, strengthen our supply chain, and create exciting new opportunities for consumers and sellers alike." - Walmart 2023 Press Release

Is Sanlam washing its hands with Africa? Not a chance.

While prospects for more growth in South Africa are bleak for the insurer, it still has room to grow in Africa. Although Sanlam operates in thirty African nations, it's ten that move the dial. Nigeria is Africa's most populace nation and although Sanlam has had a bumpy ride in the country it is well positioned to take market share when Nigeria turns positive. East Africa is another prime growth area due to stable democracies and good demographics with good links to Europe and Asia. Morocco is another country that could receive more attention from Sanlam which entered eight years ago through an investment in Saham Finances SA, a joint venture with Allianz.

Nearly a century of operating in the rest of Africa provides valuable lessons for navigating complexities associated with emerging economies such as India. Strong local partnerships are essential to leverage local networks and expertise to navigate cultural nuances and regulations. Each country will have a unique distribution and product creation strategy. Sanlam is not new to India and entered in 2005 and grew gradually until 2015 when it acquired 51% of Shriram Life solidifying its position in the country.




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