Sanlam Limited ($SLM)

Good day, ladies and gentlemen, and welcome to the Sanlam 2026 3-month Operational Update. [Operator Instructions] Please note that this event is being recorded. I will now hand the conference over to Paul Hanratty. Please go ahead, sir.

Irene, thank you very much, and good afternoon, ladies and gentlemen, and thank you very much for joining us on this call today. I am joined on the call today by our Group Finance Director, Abigail Mukhuba; our Group Chief Risk Officer and Chief Actuary, Mlondolozi Mahlangeni; and our Head of Investor Relations, Tokelo Mulaudzi. Earlier today, we released our operational update for the first 3 months of 2026. I'll provide a very brief overview of our strategic progress and operational performance before we'll open the line for questions. The group is investing in organic growth. And while this puts some short-term pressure on earnings, it underpins future growth. Against this backdrop, I'm going to cover 5 points briefly in order, I hope, to assist you in making some sense of the quarter's performance. First off, the group continued to make excellent progress in the execution of strategic priorities in the quarter. We closed the Ninety One transaction in early February. The MUFG capital injection into Shriram Finance took place just after the quarter end, and we now have more than 50% share in each of the Indian insurance businesses and their economics. We have capacitated the Lloyd's syndicate. Our cloud migration is on track, and we're progressing to launch banking services in South Africa, just as soon as we've obtained the necessary regulatory approvals. We're confident that our current platform, coupled with the growth sectors we're investing in, will drive future growth for the group. Second point to make at this time is that the group's capital position remains very strong. Discretionary capital is now around the upper end of our long-term target range following the closure of the Indian insurance transactions. And this stands us in good stead to deal with any volatility that might arise in the balance of the year. Turning to earnings, which is the third area I want to talk a little bit about. In our business, of course, 1 quarter is no real guide to the full year. And this first quarter saw volatility in both investment variances from ALM hedging and large reductions in underwriting profit for both Santam and SanlamAllianz as a result of large weather-related claims. Importantly, Santam still achieved an underwriting margin above the midpoint of their target range despite those adverse weather claims, while SanlamAllianz fell below this range. The weather losses in the first quarter were large compared to the prior year, but within the normal range of what we expect in any given period for this sort of event. Judging earnings progress from prior year, one needs to adjust for the South African rand strength, sale of the asset management business to Ninety One, the dividends and capital movements will not appear in Sanlam's operating profits and for the restructuring of the group to upweight India while downweighting SanlamAllianz from a profitability point of view. Investment variances included in operating profit were positive for the quarter. For the purposes of determining cash earnings from which we can declare dividends, these investment variances are transferred to the asset mismatch reserve for release to profits in later years, exactly as in the past. The Ninety One transaction creates different effects across operating profit, headline earnings and GEV. So quarter-on-quarter comparisons require some particularly special care. Importantly, the transaction strengthens both our strategic position and future dividend capacity. The investment returns on shareholder funds were lower in the first quarter than in the first quarter of the previous year. Higher bond yields and some stock market weakness in Morocco, in particular, drove lower returns on those assets. As a result, return on equity was a little depressed in the first quarter. The fourth area that I want to focus on is new business volumes and net client cash flows. We're delighted to see overall strong growth in new business volumes and net client cash flows. Overall sales were strong with particular emphasis on capital-light market-linked sales with only SanlamAllianz General Insurance and the Indian life sales disappointing. The lower VNB margin primarily reflects product mix rather than a deterioration in underlying economics. And consistent with these bumper sales was good persistency experience. Finally, I'd like to mention a few points regarding the outlook for the balance of the year. Despite the current global volatility, we are optimistic both about the long-term growth prospects for the group and the current year performance. Our clients have weathered the storm so far. And while higher oil prices and inflation will create cost of living pressures in the short term, the group remains well positioned for long-term growth. The weather-related claims in the first quarter are not out of line with our expectations of potential volatility from the source. Parts of the Western Cape have suffered severe storm damage over the last few weeks, i.e., after the quarter end. The extent of the damage has not yet been quantified yet, and we do expect it to have an impact on the results as the year progresses. We have, however, taken a number of actions to prioritize restoring both VNB margins and to compensate for the higher claims experienced from weather events in the first quarter. This is across the group. Some of these efficiency initiatives will only be fully realized by the end of the year. So we expect to have second half earnings higher than first half earnings, always subject, of course, to weather, global geopolitical environment and, of course, the normal economic factors and market levels that we are susceptible to. We do, however, see some progress on earnings growth by the end of the first half. So in conclusion, the first quarter of '26 has seen some considerable strategic progress, and we remain confident about meeting the long-term targets we set for the business over time. There are quite a few moving parts affecting the first quarter's operating profit, but the group remains confident that through its actions, it will be able to meet the full year guidance, subject, of course, to those same unknowns of weather, the geopolitical environment and, of course, various market levels. I hope that those few comments help just to give you a little bit of boundaries around -- and some guidance on how we saw the first quarter. I will now open up to questions, and Abigail and Mlondolozi are standing by to help answer your questions. So thank you very much.

[Operator Instructions] The first question we have is from Michael Christelis of UBS.

Can you hear me?

Michael, we hear you perfectly here.

Excellent. I'll start with 3 or 4 questions, if I can. I think the main one that concerns me a little bit is the margin, obviously. And I wonder if you can maybe just give us a little bit more color as to the various moving parts there. You talk about negative margins in India. And I'm just trying to understand what is the trajectory of, say, mass market in SA and middle and affluent market in SA relative to the full year number. Has there been, like, a sharp deterioration in either of those 2? Those are the 2 that I'm most interested in. That's the first question. The second question is just on the Indian life insurance transactions that were completed. Is there going to be any EV write-down impacts for goodwill? If you can just give us a sense of how big that would likely be for our modeling for half 1? Then the third question, the investment management guidance or profit growth -- operating profit growth on a normalized basis looked a little bit on the low end to me, given how well opening assets should have been higher than the year ago. Can you talk about the impact that stranded costs -- are the stranded cost impacts in that 7%? Or have you normalized that out? I'm just unsure about that, if you can. And then the last question, if you don't mind, is just on mortality for the -- I know it's 1 period, and 1 quarter is a very short period, but just how is mortality looking? It was really good across the sector end of last year.

Thank you, Michael. So let's go through those 4 one by one. Sorry. I should have written them down as you -- I've been listening carefully. So your first one was actually around the VNB margin. And I think you were interested in particularly what has happened to the margin in the mass business and the -- mass business and the affluent business. So look, I've said to you guys many times, you have to be very, very careful with VNB margin because it's the weighted average of a lot of very, very different things. So some products have much higher margins than other. If you take something like market-linked business where you get to switch from immediate annuities to market-linked, actually, the VNB doesn't reflect a huge chunk of the profits that you're going to make on that business because it's sitting in your asset management operations. So that's why the margin on those products are lower. When you talk about the mass market, I mean, it is true that actually our spread of costs is not even over the full year. So actually, the first quarter of any year, the VNB is a little bit lower in the mass business than in the full year. So that is a little bit lower. The affluent business, it's literally just a huge mix swing. I think, Mlondolozi, you have to correct me if I'm wrong, but I think in the first quarter, the immediate annuities were down to 18%, am I right, of the total?

Correct.

Yes. Whereas -- what was the number for the full year last year? It was about 30%, right?

Yes, around 25%, 30%.

Yes. So you're adding -- that change of mix is a big thing. But each individual product still has the same VNB margin inherently. It's not as if the margins themselves are being compressed, if you get my point. India is in a turnaround. I think by the end of the year, we'll start seeing positive VNB. But obviously, anything that's negative pulls the weighted average down horribly. The second question related to -- Michael, just to remind me, you asked about...

Life insurance GEV impact, any write-downs there?

GEV impact. So that -- I think, Mlondolozi, you know the answer to that?

Yes, I know the answer to that, Paul. So just for -- there won't be a GEV write-down on the life businesses because the transactions were done at appraisal value, but we value them at GEV. So -- and we did them at about 2x GEV. So there will be -- for the life transactions, there will be a write-down of 50% of the purchase prices. On the general insurance side, there's not going to be a GEV write-down on [ the GI ] transactions. But for the life transaction, it's 50% [ cheaper ] we will write-down.

Worth pointing out, Michael, of course, that, that GEV write-down on the life -- the Indian life business is minute compared to the uplift that you would expect to see on the Shriram Finance stake and the Ninety One stake. Yes. And your third question was -- and actually, it's a good question you asked because it actually underlies, in a certain sense, the flaw in the whole GEV methodology where you ignore the value of goodwill or new business on life business. Your third question related to -- I know the fourth one was mortality. What was the third one again?

Investment management -- the investment management operating profit growth, does that include stranded costs?

Yes, it does, by definition, include stranded costs in there. Abigail, are you able to add any color to -- or Mlondolozi, to that topic?

Yes, Paul. Michael, on this, right, it does include stranded costs. So the 7% that you're referring to for the quarter, that includes stranded costs included in there. Overall, for the full year, we did communicate that it's approximately about between ZAR 200 million to ZAR 300 million of stranded costs that this business [indiscernible] to ensure that we gain more efficiency on that. Yes.

Can I just say one thing, Michael, is that the answer to why it's only 7% doesn't lie in the stranded costs. The answer lies in very good -- this is why quarters are horrible things, very good performance fees in the prior year in Q1. And then on mortality, I think mortality is just -- I mean, Mlondolozi, again, will -- I'm sure you'll tell me if I'm wrong, but it's trending along pretty much in Q1 where we -- there's nothing unusual. It's not elevated, and it's not depressed. There's been no bump on profits and no setbacks. I think you must know this, Michael, is that the winter months tend to be the bad months on that front.

The next question we have is from Faizan Lakhani of HSBC.

First is on the project expenses. Could you provide some color on how that's developed year-on-year? And just give us a reminder in terms of what the guidance is for that line item for this year and next year? The second question is on SanlamAllianz. I mean it was obviously a tough quarter due to the weather. Could you maybe give us an idea in terms of how much of that poor performance is down to attritional versus cat? And what's a realistic time frame for sort of rejigging that portfolio? My third question is a comment you made in there about the weather events being tougher than last year, but broadly in line with where you think they could be within a range. Just want to get a sense in terms of -- versus, sort of, best estimate, how was the weather in the quarter relative to expectations. And finally, I just wanted to come back to the same question on the VNB margin. It's very clear from what you're saying in terms of VNB is not a great indicator given where it sits in different line items. But given how your mix has developed and where the margin is, how should we think about the flow through into the P&L and into capital generation from a solvency perspective?

Okay. That was quite a mouthful. I think there were 4 questions there.

There were 4. Yes.

Yes. Will you just remind us of the first one, just do them one at a time.

Yes. The first is on the project expenses. Any sort of guidance there in terms of...

Abigail, you can provide some guidance on the project expenses.

So on the project expense base, Faizan, we did guide through the year-end process that we expect the project expenses to remain slightly elevated in 2026 as well similar levels as slightly below the 2025 levels. And that was mostly as we were embedding the SA ecosystem in terms of the launching of the banking -- transactional banking proposal as well as the rewards and setting up the SA ecosystem. However, I think, like any other business, we are operating in an environment where we're having to deal with the realities of a very tough macroeconomic environment. So this is an area that we are also looking at to see if we can responsibly delay and/or reduce some of our project expenditures. So we expect the project expenses for the year to slightly come down from what we had initially guided. I would say that it could be levels below ZAR 500 million if we're just looking at the project expenses that are not prefunded. Obviously, we do have the other project expenses that are already prefunded, and those don't generally knock your P&L.

Okay.

Your second question, Faizan, had to do with -- just remind us.

SanlamAllianz in terms of how much of that experience is down to weather versus attritional and what the time frame is for that to sort of get back to target returns.

Yes. And I think you also asked, I think, somewhat related about what our expectation is. Now I think you can appreciate, especially because you live in England and you know a lot about the weather is that I wouldn't say we don't budget or have an expectation specifically for the weather in any given quarter, although, obviously, we know some periods are dry and some are wet. But we have kind of budgets for what we think are reasonable level of that type of thing over the course of a whole year, right? And you have a feel for -- if these are not a way outside of our expectations of what we're trying to say. We don't have -- we have a budget for the year. I don't want to give you what our budget for the year is, but it's not particularly abnormal, whereas the first quarter of last year was actually very good, extremely good. But I mean, you may remember some years ago, there were absolutely horrific floods in Morocco. So we have floods again this year, which was a problem. But we had the absolutely horrific things. And actually, in that instance, there was not a lot of claims for us because actually the government stepped in and sorted out that they were actually worse, far, far worse and people's houses were swept away and so on. But a lot of the people who had houses swept away were uninsured people. They were relatively poor people without insurance. So it is a bit hit and miss. But we're always saying that you don't need to worry. This is not a sort of a Florida floods kind of scenario. We'd expect by the end of the year, for the balance of the year to be relatively benign, but you never know. I mean storms and [ hurricanes ] come in from anywhere any time. So that's really all we've guided. You had another question, though, I know on something else.

Yes, just sort of around the comment around VNB margins and how should we think about the overall business flowing through into the P&L.

Yes. Mlondolozi, I think this is probably your best your territory.

Yes, Paul. So I'll take it. Nice to speak to you again. Yes. So the way you think about it, I mean, you mentioned the point about what's been changing in the business mix and as Paul indicated earlier on, that the mix will shift based on certain external factors, for example, markets and so forth. But the way to think about it from a capital generation perspective is that whilst you are adding lower VNB, covered VNB, because you've got slightly lower margin product, they are also less capital intensive. And therefore, from a surplus generation perspective, your capital requirements are also not growing as much as if you are adding the more capital-intensive products. So what you will see from a capital generation perspective is the reduction in the pace of your capital requirements growing aligned with the reduction in your generation of your own funds. So you have a slight offsetting effect. And what you will then see over time is then the level of profitability you've got slightly lower margin will be slightly lower in rand amount, but your return on capital will still remain healthy. And as Paul indicated, our margins by product still remain very healthy and they meet our hurdle from a return on capital perspective. You'll just get a reduction in the margin level. So that's what -- that's how you should think about it from an organic capital generation perspective.

Thanks. Irene, are there any others -- any other questions on the call?

Yes. So we have a few more questions. The next question is from James Shuck of Citi.

I had a couple of real questions and then just 3 of clarification. I'll start with the couple of kind of real ones. The first one is kind of just -- you mentioned in a few places about how investment drag has come through in Q1, and there's going to be certain investments, et cetera, made through the year. Could you just expand on that a little bit, ideally quantifying and where that's appearing and how much it is and what the outlook is in terms of that investment drag? That's the first question. And then secondly, I just wanted to ask about the normalized insurance and shareholder investment return outlook. A lot of your metrics that you measure yourself on the new targets you have are all kind of free of variance. And therefore, you must have an expectation for what 2026 insurance and shareholder investment returns are likely to be. I think from where I'm sitting, it's very hard for us to model that and have an expectation. So if you could actually give us some guidance over that, that would be immensely helpful. I'll come back to the 3 clarifications in a second, if that's okay.

Sure, sure. Look, I think your first question, I mean, we can go back to Abigail. I think she has spoken about the project expenses, which is where the investment is going on. I mean, do you want to have another go at it, Abigail?

Of course, in terms of the project expenses, the investments go into -- firstly, we're modernizing a lot of our technology. One of the bigger ones that we're doing there is the migration into cloud of our -- we currently have legacy on-prem systems. So that's one of the things that we're doing. We are also trying to embed AI into our processes. That's on the technology front. But also from a revenue-generating perspective, we are investing in growing some of our branch networks in the South African context, and we are also investing in the rewards program as well as the banking proposition. So there's a few of them that are intended to solidify our position in the South African market. But also just to modernize the organization, we also have other amounts, obviously, typical of when you've got corporate activities, obviously, some of them still as far as some of the transactions that happened earlier in the year.

But I think it's fair to say, Abigail, we're not going to give you a list of every project we have and the amount we expect to spend on it. I think that would be a level of overkill. On the subject -- your second question pertaining to -- sorry, just remind me your second question was on...

I wasn't quite sure if you could hear me because I think I got cut off a little bit. The question on investment wasn't so much the project expenses.

It's more about what our expectation was. Yes?

No, no, no. Sorry. Can you hear me okay? Just check if you can hear me.

We can hear you.

Okay. Sorry, if I go back to the first question, the question was less to do with project expenses and more to do with investment expenses that are occurring within the operating profit line, but things like investment in India, and I think there was something else mentioned elsewhere in the release. So it's not -- yes, it's within the operating profit. If I got that wrong, there's nothing really dragging on that and that's fine. And then the second question was on the normalized expectations for investment...

Okay. Okay. Okay. No, look, I think in a place like India, I mean -- yes, so Abigail, I think the question is in a place like India, how much are we investing in growing that retail distribution channel? And I don't think we're -- James, we're not disclosing that sort of level of detail at this point in time. I think it's something Abigail will have to go and think about whether she wants to get down to that. In terms of the investment return, I mean, Mlondolozi, I think it's good for you to answer this question. I think we clearly do have an expected return over the year. And the rise in interest rates is obviously what's [ harming ] things. But I think a lot of that has actually already come back since the quarter end. But maybe you could answer that.

Thank you, Paul. I can answer that. So we do have an expectation of the investment returns. So for the full year, we are expecting to end around, say, 8% to 9% after tax. And the reason for that level of return is that more than 50% of the assets that are backing our capital portfolios are in fixed interest-type investment and another quarter in equities and the balance in other assets. So what has happened in the first quarter, particularly what caused the drag was mainly the rise in interest rates, as Paul has indicated in the first quarter, some of which has now reverted. But also, it was the equity performance in our Moroccan business, where a large component of our equity exposure is held. So when we look at the remainder of the year, our expectation will be based on what happens to equity markets. But I mean, I think, half year, we'll be able to disclose a lot more information around the asset allocation for the shareholder capital portfolio as well as the expected returns for the different asset classes. But if we are looking at the expectation in the first half -- first quarter of this year, the return that we achieved was lower than the expectation because of the rise in interest rates as well as the underperformance in equity markets, particularly in Morocco.

Okay. And that's the return on shareholder fund reserves, right? You were talking about the 8% to 9% [indiscernible]?

Shareholder funds, on the shareholder fund results.

Okay. Just a clarification point. The credit spread widening you mentioned is being a drag. Can I just check that it isn't included as part of the investment variance MTM kind of adjustment. So it looks like it's included actually in the pre-adjustment like-for-like number. So do you not normalize for credit spread widening?

No, we don't normalize for credit spread widening. So our normalization principles have really been mostly for M&A activity as well as currency. The -- rather -- that forms part of the overall conversation, but it's not normalized at all. To the extent that there are investment variances or investment return impact from the M&A activity, that would be a part of that.

Yes. I think, let's let Mlondolozi clarify the credit spread and the treatment of investment variances around it.

Yes. So I mean, I think there is maybe 2 things to consider. So in -- the credit spread widening is treated -- a component of it is treated as an investment variance. So we assume that 50% of the credit spread widening effect is in an investment variance and the remaining 50% is treated as an indication of a deterioration in true credit quality. So that's how it's treated from an investment variance perspective. What Abigail was covering was when it comes to the normalization of operating profit, for example, to get to a like-for-like comparison, in that particular normalization, you don't adjust for the credit spread widening specifically because it is treated as an investment variance. So that's the 2 aspects. So I think, James, for normalization purposes, where you're allowing for structural changes, you don't normalize for the credit spread widening in that normalization.

Okay. Hopefully, this will get clearer at 1H. I'm conscious of people have questions. Just one more quick one for me. Can I just ask what the operating profit before variance baseline was for 2025? I know you have the target that you've reiterated today. Just I'm not entirely clear what the 2025 absolute base number is that, that refers to.

Abigail?

Just is that for 2025 for the first quarter or the full year?

For the full year '25. Is it just the ZAR 407 million I need to adjust...

Your operating profit, excluding investment variances for the full year, was ZAR 13.853 billion.

ZAR 13.853 billion.

The next question we have is from Baron Nkomo of JPMorgan.

Just 1 or 2 questions from me. I think some of them have been answered. But can you maybe just comment on the outlook for persistency for the rest of the year, given the potential impacts, I guess, of inflation? And then maybe just to clarify on SanlamAllianz, the guidance for the full year, is that your underwriting margins return to your through-the-cycle target ranges? What -- was that the official guidance?

Okay. So let's just talk about persistency to begin with. If we talk about -- each of us on this call will have different expectations about what's going to happen to inflation for the balance of the year. But I think amongst all of us, we probably managed to agree that we see the expectation of inflation or the expectation that inflation will rise. The only issue is to what extent and precisely what it impacts. So we do expect it to have some impact on people's cost of living and, therefore, on disposable income. And that could well have some pressure -- put some pressure on persistency. So all we have said is that at this point, persistency is well under control. Of course, the longer we're into an upward inflation cycle, the worse -- the higher the risk becomes, and particularly, if that is coupled with relatively weaker growth and higher unemployment. But the other thing about inflation, of course, is it's going to have a big bearing on claims costs in your general insurance businesses right across the board because it will put upward pressure on costs of repairs and replacement of things. So if you ask us what exactly do we think is going to happen, we don't know probably any better than anybody else does. But it's a definite downside risk rising inflation to both persistency and, of course, the sales as well, sales persistency and GI claims costs and, therefore, underwriting margin. And then, Baron, your second question was around -- just remind me, was on...

Yes, I'm just clarifying the guidance for the year on the underwriting [indiscernible] your expectation. Yes.

We'd expect the underwriting margin to be within the range for the balance of the year, right, but not to recover what they've lost in the first quarter. [ Ticketing balance ] they're not going to pick up the run rate that they've dropped in the first quarter, but you'd hope that they'd be on the original expected run rate for the balance of the [ earnings ]. So we have to make that up from elsewhere, which is why Abigail will get into a bit of detail around some of the efficiencies that we're pushing through all over the place.

The next question we have is from Thapelo Mokonyane of Investec.

Just one question. Can you please clarify your full year earnings guidance? You specifically mentioned that you are confident that you will meet that guidance. Just please clarify what was your guidance?

Abigail?

So our guidance was that for earnings purposes, we expect that for 2026, we're going to have South African CPI plus 3% for 2026. Our vision to 2030 or through the cycle guidance is CPI plus 6% through the cycle. So we did flag when we came out with our full year 2025 results that we expect that for 2026, given some of the investment that we're putting into the business that there would be a bit of a drag for 2026. But a lot of it was also linked to the structural changes that we were seeing in the business between '25 to 2026 as we [ bedded ] down some of the activity. the main -- some of the main ones that impacted the -- I think James called it a drag as well, a bit of a drag, was that we know that we have launched from a Santam perspective in our GI business, the Lloyd's syndicate. And we expected that, that, obviously, in its first year of operation would be in a loss-making position or in, like, an early start-up J-curve. Then we also saw again in the Santam business that 2025 was what we call abnormally benign weather events year because we didn't really have many big events in terms of weather last year. And already in 2026, we are seeing that normalization as we had indicated at the time. And then you also have, obviously, a bit of the structural shift as far as the percentage shareholding that we had between the different businesses that was included in that guidance. But a long answer to say that our guidance was CPI plus 3% for 2026.

Probably the most important thing to say is that, that excludes investment variances because that's outside of everybody's, a, control and b, guesswork.

The next question we have is from Warwick Bam of RMB Morgan Stanley.

I've got 3. I'll just start really on the same topic, just in terms of your guidance for 2026 on operating profit, which excluded investment variances. In this release for the first quarter, you did highlight what investment variances did for certain line items. But are you able to disclose what it did for actual operating profit? If you were to provide an equivalent metric to your guidance for the full year, what did the first quarter do? Second question is just on the Indian rupee. Obviously, a meaningful headwind in the period came through in a variety of places. But I just wanted more clarity on what the quantum of the Indian rupee hedge, the loss that you incurred in the first quarter that won't repeat. If you could just highlight what the quantum of that loss was? And then lastly, you highlight the Sanlam Morocco or the Morocco equity markets and again, the investment returns that are coming through from that. If I look at Sanlam Morocco share price, that's up 42% year-to-date. I understand you've made some progress there on merging with Allianz business and perhaps the share price is a function of that. But just trying to get a sense of what progress you've made there? What has the regulator agreed to? What is the impact of that share price movement to group equity value, if anything?

Okay. Three good questions. So Abigail, if you go there, it sounds like the first 2 are yours and the last one, Mlondolozi.

So on the operating profit, excluding investment variances, percentage would be minus 7% for the first quarter [indiscernible]. And then the hedge loss quantum was ZAR 103 million for the first quarter.

Mlondolozi, on the impact of that valuation on GEV?

Yes. So I mean we do have a look at the valuation of the share price. But from a fundamental valuation perspective, we value our Moroccan business based on discounted cash flow basis. And it's quite a very thin float, that stock. So we value on a DCF basis. And to the extent that there are fundamentals that are driving the valuation, it will be reflected in our TCF. So what you've seen in the share price might, at different times, deviate from what we see from a DCF perspective, but we do check it against the valuation of that share price. So what we've seen in the improvement in the valuation would work in our TCF in the first quarter of the year. There's been a positive [indiscernible] performance apart from the negative equity performance that we referred to earlier, which comes through in the operating profit line.

Warwick, I think there's a very sort of simple rule. If the businesses are really big like Santam and liquid, then we tend to use market price. But this is a very tightly held stock, to be honest with you. I can't even remember what is the free float on that stock. I mean it's 20%. Is it even 20%? So the market value is not very helpful. So for all those kind of things, we tend to just use a more fundamental valuation. It's only really when the price is lower than our fundamental valuation that anybody is actually jumping around looking at it.

Maybe I can just -- if you could just add a little bit of color around what's been agreed around the merger with Allianz and Morocco and what the regulator has allowed you to do?

Okay. Heinie. We got Heinie, I think, on the call. Heinie, why don't you just add a bit of detail because you're in the detail. This has been a long negotiated thing, Warwick, as to what exactly we need to do, and we've been through those steps now. So Heinie, do you want to just talk about the branches we sold and so on?

All the regulatory process is nearing completion. We are targeting final approval, regulatory approvals in June, early July, and hopefully to have the special EGM then for final merger approval in July. It took a very long time, as Paul says, because we are 2 years where we had to dispose of certain sales points where we had to reduce certain product lines to adhere to the competition commission concerns. But everything is on track, I want to say, for, hopefully, if nothing comes -- nothing happens, that we should do the full merger in July.

Irene, back to you if there are any more calls.

Thank you, sir. We have no further questions on the line, and I will hand back to you for any closing remarks.

Irene, thank you very much, and thanks for being a good host to us. So everybody, thank you very much for making the time to join us. We always appreciate your support. We enjoy the interaction. And we look forward to seeing you in September to go through the half year results. And I think hopefully, we will improve some of the disclosures, particularly around how the NAVs are invested and the kind of investment returns that you can expect over the long term coming out of those. So yes, thank you very much to everybody, and we wish you all a very good evening. Thanks a lot. Irene, you can now terminate the call.

Thank you, sir. Ladies and gentlemen, that does conclude today's conference. Thank you for joining us. You may now disconnect your lines.