March 7, 2019 / 5:49 AM / 6 months ago

UPDATE 2-S.Africa's Sanlam hit by global markets rout, weak growth at home

(Updates with CEO interview, adds context, shares)

JOHANNESBURG, March 7 (Reuters) - Sanlam, South Africa’s biggest insurer, reported a 10 percent fall in 2018 earnings on Thursday as volatile global markets that have hurt firms from Prudential Financial to BlackRock hit its investment portfolio.

Life insurers, asset managers and other companies with big exposures to bonds and equities have suffered amid the tumult in markets, especially in the final three months of the year, while Sanlam was also hurt by a weak economy in South Africa.

Its normalised headline earnings per share - the key profit gauge in South Africa - fell 10 percent to 431.7 cents ($0.3027) from 480 cents.

Net investment return fell by 57 percent while its normalised headline earnings were down 8 percent to 9.1 billion rand ($638 million).

CEO Ian Kirk described the results as “very credible” given the environment the insurer was operating in, with good companies in South Africa producing “poor or average” results.

“Obviously... we’d want to be able to do better but we can only operate with the scale that we are and the environment we’re in,” he told Reuters in a phone interview, adding there were some areas of solid performance.

After a rush of initial optimism in South Africa following the appointment of President Cyril Ramaphosa in early 2018, Sanlam said investor confidence had faded as the year progressed, while growth was “pedestrian”.

Sanlam’s performance has also been hampered by rising interest rates in the United States, uncertainties over Brexit, Sino-U.S. trade tensions and volatile currencies in a number of its markets.

The firm’s shares fell more than 3 percent on the news, but had recovered to 75.64 rand per share - a 2.17 percent decline - by 0710 GMT.

Sanlam’s retail and investment businesses were among the worst hit, while its emerging markets business benefited from new business growth of 68 percent largely related to its $1 billion acquisition of the remainder of Morocco’s SAHAM Finances .

Its East African business, especially in Kenya, underperformed.

The insurer is planning to enter Morocco and Egypt as it seeks to gain a foothold across the entire continent.

Kirk said it could expand into Morocco and take an equity stake in a partner it has identified before 2021, although it was still looking for a suitable partner in Egypt, where it also plans to take an equity stake in a firm.

$1 = 14.2600 rand Reporting by Emma Rumney; editing by Jason Neely

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