Sanlam, one of South Africa’s largest life insurers, on Monday confirmed the cost to it of the announced joint settlement agreement between the life-insurance industry and National Treasury at R600-million (pre-tax).
Sanlam CEO Johan van Zyl earlier on Monday said that the post-tax cost would be R500-million.
The agreement makes provision for minimum early-termination values of retirement annuity and savings-related endowment policies once the required regulatory and legislative changes have been implemented next year. The minimum standards, where applicable, are retrospective for five years and the overall cost for the life-insurance industry is estimated at R2,6-billion rand (pre-tax).
Commenting on the agreement in a statement, Sanlam CEO Johan van Zyl said: “I would like to commend National Treasury and members of the LOA [Life Offices’ Association] for the frank, yet constructive, discussions that preceded today’s groundbreaking announcement.
“These initiatives mark a real commitment from all role players to adapt to changing client needs and saving and employment patterns.
“We are satisfied that the early-termination values have been addressed on a broad policy and product base and that the agreement ensures fair treatment across the spectrum of affected policies.
“Sanlam refrained from providing estimated costs or making provisions for enhanced termination values in our financial reporting this year because of the uncertainty around potential minimum standards.
“I am confident that that the estimated pre-tax cost of R600-million for Sanlam that is now confirmed will clarify the issue for Sanlam’s shareholders and that we have found an equitable solution to this issue. It represents an important investment in the future of our industry.”
Van Zyl added that Sanlam has been hard at work this year, improving its products and policy cost structures in order to better accommodate the needs of its clients who require higher degrees of flexibility and choice in order to meet their savings requirements. The acclaimed new StratusSP product, which was launched earlier in the year, addresses exactly these needs.
In addition, the group has implemented cost savings of about R600-million across all its businesses over the past two years.
“Sanlam remains committed to its role as an important custodian of the savings of all South Africans. Our offering is highly competitive and we will continue to review, evaluate and enhance our products and services in order to provide our clients with the best possible value for money,” Van Zyl said.
He urged clients to remain invested for the full duration of their savings and investment products wherever possible, in order to enjoy the full benefit of staying in the market over time, and of the effect of compound interest on their investments on maturity. Although the minimum early-termination values now apply for policyholders who terminate their policies early, it should still be viewed as an option of last resort.
Clients who ceased or reduced premiums on their retirement annuities or endowments over the past five years will be able to apply to have minimum termination values on their retirement annuities and endowments applied retrospectively once the relevant regulations and processes are in place.
Sanlam will communicate the details on the implementation date and the relevant procedures to its clients once these regulatory and legislative processes that will enable the minimum standards for early termination values are finalised next year. — I-Net Bridge