Sanlam vs Discovery Both are high quality insurers, but risk/reward now favors SLM (u/g to OW) over DSY (d/g to Neutral)

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Sanlam vs Discovery Both are high quality insurers, but risk/reward now favors SLM (u/g to OW) over DSY (d/g to Neutral)

than Discovery across earnings, book, and embedded value / GEV lenses

(notably P/E and P/GEV), while also offering the higher dividend yield (5% vs

1%). This valuation gap matters because both companies have credible

medium-term growth ambitions, but the market is paying substantially more

for Discovery’s growth today. In our view, Discovery’s share price return has

already pulled forward a meaningful portion of the upside from the 2024 CMD

narrative, while Sanlam’s weaker recent performance leaves more room for

fundamentals and delivery against targets to drive re-rating.

• CMD targets vs our operating profit forecasts: In our view, both companies

can grow, but only one is priced for it. Sanlam’s recent CMD (link) introduced

new 2030 targets, including operating earnings growth of CPI + 6% and ROE

above 20% per annum, which management framed as minimums rather than

stretch goals. Discovery’s last CMD was upbeat and highlighted global

expansion through Vitality Limited, with targeted annual earnings growth of

20–30% over five years for the international operations, alongside a targeted

12.5–17.5% earnings growth for the core South African operations. It also

reiterated broader group ambitions of 15–20% earnings growth and 15–20%

ROE by FY29. The group is well on track to meet these targets. Against those

aspirations, our operating profit paths are strong for both names, but Discovery

is already priced at a premium. We see Sanlam growing its operating profits at

an average 12% over the next three years, and Discovery at an average 13%.

Overall, Discovery’s near-term growth is higher on our numbers (especially