South African financial services giant Sanlam Limited reported weaker new business momentum in its latest results, with the group’s life insurance net value of new business (VNB) declining as product preferences shifted and strategic changes across its distribution network took effect. The development highlights how even one of Africa’s most established insurers is being forced to adapt to changing customer behaviour and evolving market structures.

Sanlam occupies a central position in African financial markets. Founded in 1918 and listed on the Johannesburg Stock Exchange, the group is one of the continent’s largest insurers, providing life insurance, investment management, retirement products and short-term insurance across Africa, India and other emerging markets. Its scale means that movements in Sanlam’s numbers often signal broader trends in the insurance industry.

The latest results show that life insurance net value of new business fell 11% on a normalised basis, reflecting lower profitability on newly written policies. On an actual basis the decline was steeper, with VNB down 21%, indicating that structural shifts in distribution and product demand are beginning to weigh on new sales profitability.

At the centre of the slowdown is a shift in the type of products customers are buying. Clients are increasingly favouring market-linked products such as living annuities rather than traditional guaranteed life annuities. While both products provide retirement income, the economics differ significantly for insurers.

Traditional life annuities involve guaranteed payments over a lifetime and can generate attractive margins for insurers if priced correctly. Living annuities, by contrast, are investment-linked products where the policyholder bears much of the investment risk. They offer flexibility and control to clients but typically generate lower upfront profitability for insurers, which translates into weaker value of new business metrics.

This product shift reflects broader behavioural changes among savers. In an environment where interest rates, market returns and life expectancy assumptions are constantly evolving, many retirees are opting for solutions that allow them to adjust withdrawals and remain exposed to market growth.

Another factor behind the weaker new business numbers lies in Sanlam’s expanding international footprint. The group has been investing heavily in building new distribution channels in India, a market with vast long-term growth potential but where upfront development costs are still weighing on profitability. Those investments have diluted near-term margins even as the company positions itself for future expansion in one of the world’s fastest-growing insurance markets.

Structural changes in Sanlam’s partnership network have also affected new business flows. The company confirmed that results were impacted by the cessation of its partnership with Capitec Bank, which previously provided a significant distribution channel for insurance products. The termination of that relationship removed a steady pipeline of new policies, leaving a gap that will need to be replaced by alternative channels over time.

In addition, Sanlam’s results were affected by the disposal of its Namibian business into the SanlamAllianz joint venture, a strategic partnership formed with German insurer Allianz to accelerate growth across Africa. The transaction, completed in 2024, reshaped the group’s regional footprint and altered the way some new business is accounted for in the financial statements.

Despite the softer new business numbers, Sanlam remains a dominant force in African financial services. The group operates across more than 30 countries and manages hundreds of billions of rand in assets through its life insurance, investment and asset management businesses.

Its influence extends into short-term insurance through its strategic stake in Santam, South Africa’s largest general insurer. Sanlam is Santam’s majority shareholder, linking the fortunes of the two companies closely. Santam released its own financial results last week, showing solid performance in underwriting margins as insurers continue to reprice risk after years of climate-related losses and inflationary pressure on claims.

Together, Sanlam and Santam form one of the most powerful insurance ecosystems in Africa. Sanlam dominates the life insurance and investment side of the market, while Santam leads in property and casualty coverage ranging from motor insurance to commercial risk protection.

The challenges Sanlam highlighted in its results also echo broader trends visible across the industry. Competitors such as Discovery Limited have been navigating similar shifts as customers increasingly demand flexible investment-linked retirement products and digital distribution models.

Discovery’s strategy has leaned heavily on behavioural incentives and technology-driven insurance models, while Sanlam has pursued scale through partnerships, acquisitions and geographic expansion. Yet both insurers are responding to the same structural forces: changing retirement patterns, evolving regulation and the rapid digitisation of financial services.

These pressures are gradually reshaping how insurers generate growth. Historically, large agency networks and bank partnerships dominated distribution. Today, insurers must combine digital platforms, independent financial advisers and strategic partnerships to reach customers efficiently.

Sanlam’s weaker value of new business therefore says as much about the transition underway in the industry as it does about the company’s own performance. The decline reflects a business recalibrating its product mix, rebuilding distribution channels and investing in new markets.

For long-term investors, the key question will be whether these adjustments translate into stronger growth over time. Sanlam’s scale, brand recognition and regional footprint still give it considerable competitive advantages, particularly across African markets where insurance penetration remains relatively low.

In the short term, however, the latest numbers illustrate the cost of transformation. As the group reshapes its product offering and distribution networks, profitability on new business is likely to remain under pressure.

What matters is that Sanlam remains firmly positioned at the centre of Africa’s financial services landscape. Its ability to adapt to shifting customer preferences, rebuild distribution channels and capture growth in emerging markets will determine how quickly new business momentum recovers in the years ahead.