The following responses to key questions provide his leadership perspective, summarise the main focus areas for the Board during the past year, and reflect on the longer-term value created by Sanlam for stakeholders.
Probably the most significant difference between Sanlam 100 years ago, and the Sanlam of today, is the exponentially bigger audience that we are accountable to. Whereas Sanlam started out with a small group of Afrikaners 10 decades ago, we now have 450 217 shareholders and a range of stakeholders in 45 countries who look to Sanlam for the creation, management and protection of their wealth.
They also expect Sanlam to provide business leadership, contribute to systemic stability and provide employment by growing and expanding.
Fortunately, the stakeholder-inclusive approach has always been one of Sanlam’s strengths – we take our accountability to stakeholders seriously and will continue to do so in a world that challenges all our assumptions and certainties.
We recognise that if we want Sanlam to be a part of the lives of generations to come – for another 100 years – we have to maintain momentum and be able to weather major disruptions. Whereas disruptions over the previous 100 years were mostly driven by internal changes and large competitors, we are experiencing a wave of disruption that is digital in nature and from unconventional, smaller players and new capabilities.
As you will read in this report, we continue to respond, counter and innovate to stay ahead of the wave, thereby creating sustained value for our stakeholders.
Sanlam’s strategy has remained relatively constant since 2003, despite major challenges such as the global financial crisis and dynamic and expanding operating environments. For the past 14 years, the strategic pillars have been tested, discussed and debated by the Board every year – and have remained largely unchanged. The diversity of our Board members ensures a good mix of internal and external views, with a spread of knowledge about the business and industry. We consider a variety of perspectives and insights as part of the strategy conversation.
The stability and clarity provided by our strategy are key elements of our investment case, as it is well understood and measured, internally and externally.
In the past year, we refined our strategic pillars to bring in a stronger focus on innovation and positioned transformation as an enabler in all areas, rather than a separate strategic focus area.
The strategy process does not end with defining our long-term objectives: as a Board, we have to ensure that this translates into execution. We hold the executive team and management accountable for delivery, and track progress on a quarterly basis.
Ultimately, we know that if we achieve our vision and deliver the outcomes that our stakeholders expect, our strategy remains relevant and appropriate. This year we brought the concept of financial resilience and prosperity into our strategy conversation as a way to evaluate the overall outcome for Sanlam and our stakeholders.
There was also increased attention to developing competitive omni-channel capabilities that will allow us to have multiple touchpoints with our clients across channels. The full digital offering adds to the ease of doing business with and retaining our clients.
The annual results are never a surprise as the Board tracks performance tightly throughout the year. It has been a challenging period for South Africa, as the country is falling behind other emerging markets and even further behind developed markets. This is a concern. South Africa remains our core market despite diversification initiatives in the past few years.
Overall the business performed well. The fact that RoGEV exceeded our hurdle rate for 2017 is a pleasing result under difficult circumstances. Single premium savings was the main line of business that reflected the strain on investor and business confidence in South Africa, but this was largely offset by strong growth in the more profitable recurring premium lines of business. Santam’s underwriting margin remained within its target range despite severe weather-related claims, testimony to the resilience of this market-leading business. The other clusters also delivered resilient results. We were particularly encouraged by the acquisitions done this year, including the expanded ownership in Saham Finances.
Sanlam’s culture aims to inspire people to realise their worth, whether they are employees, clients, partners or suppliers. The Sanlam Wealthsmiths™ value proposition explains that we have a desire to make a positive difference in people’s lives, that we have a culture rooted in sincerity, respect and care for each other, and that we have a focus on doing things correctly and doing them together: being united in doing good.
This inclusive approach is particularly evident in the way products and services are developed, shared with clients and supported through our distribution channels. Read more about our approach in the Indie case study.
Sanlam is a pioneer in incorporating the client view into product development and governance structures. The Board’s Customer Interest committee was established as early as 1998, and has since broadened its mandate in terms of Treating Customers Fairly (TCF) Regulations. The committee monitors client-related decisions and complaints, while ensuring that our practices remain aligned with the six fairness outcomes of TCF, even in markets where it is not yet a regulatory requirement.
A further measure of our reputational resilience is the public recognition and awards Sanlam receives. In the past year, these included a range of brand awards at the Loeries, which positioned Sanlam as the most awarded financial services brand and the second most awarded brand overall.
The #conspicuoussavings campaign, which formed part of Sanlam’s National Savings Month initiatives, received a variety of accolades, including winning a gold prize at the African Excellence Awards and three PRISM awards.
We are particularly proud of SEM, which was awarded the African Insurance Company of the year at the African Insurance Organisation’s annual conference in Uganda in April.
Following the rebranding of SEM partners to Sanlam in Tanzania, Uganda, Mozambique, Kenya and Zambia since 2015, the recently acquired PineBridge Investments was also rebranded as Sanlam Investments East Africa.
According to a recent brand health tracking study conducted by Millward Brown, Sanlam’s brand is particularly strong where consumers are faced with investment decisions. Sanlam is the first-choice product brand for Insurance, Wealth and Financial Planning. We are achieving our goal of positioning Sanlam as the leading voice on the topic of savings in South Africa.
MiWay’s strong brand and corporate culture was invaluable in dealing with a social media incident this year, where MiWay trended at number one in South Africa on Twitter after the content of a MiWay email was changed and posted on the social media platform, sparking widespread racial outrage. The way in which the incident was handled prevented reputational damage and strengthened the business’s credibility.
Geopolitical dynamics and sovereign status are significant risks for SEM as the economic outlook in a number of the African countries in its portfolio remain depressed and score high on the corruption perception index, which points towards a higher risk of non-compliance.
To address these risks, we are deepening our relationships and becoming more involved partners rather than investors. We are improving our governance structures and capability while aligning these businesses with Sanlam’s corporate culture. To empower Board members in all our emerging market entities, we are refreshing governance and ethics training to ensure Board members are aware of Sanlam’s rights and responsibilities. Tighter control mechanisms will also bolster governance – more formalised governance ensures tighter control of exercising rights, which will in turn enable more control and direction over in-country partners.
Where appropriate, Sanlam is increasing its shareholding – and thereby control – for example in Saham Finances, which has the potential to make Sanlam the undisputed financial services leader in Africa.
The opportunity for organic growth in African countries is limitless but demands high levels of collaboration and immersion. Our short-term focus is on driving our product strategy as well as exploring in-country bolt-on acquisitions.
In the Group Chief Executive’s strategic review, we provide more detail on the structures and outlook for SEM.
Sanlam has been a signatory of the United Nations Global Compact since 2010 and supports its 10 principles, which touch on human rights, labour, the environment and anti-corruption. We also align our socio-economic development and corporate investment initiatives to 12 of the 17 Sustainable Development Goals.
Sanlam recognises the potential impact of climate change events on our business and investments following several significant and disruptive experiences in the past year. These included catastrophe events such as Hurricane Irma, the wildfires in California and Portugal, as well as several devastating weather-related catastrophes in South Africa.
These events, combined with disruptive technology and cyberthreats – which is now the top risk for insurers – reaffirm the importance of having stable financial systems that support financial resilience, inclusion and prosperity. A well-established infrastructure of insurance companies, banks, investment groups and stock exchanges enable individuals, organisations and societies to better cope with change and unforeseen shocks.
More information about Sanlam’s initiatives to support, create and maintain financial resilience and prosperity is available in the Resilience Report.
We are committed to transformation and sustainable progress, to creating a world worth living in. We invest in our communities and will continue to empower people to live their best possible lives.
Effective regulation and industry supervision are essential to build consumer confidence and to entrench the trust between stakeholders in the financial services environment. Sanlam supports the major regulatory developments currently being considered in the markets where we operate, as these are largely in line with our resilience and sustainability objectives.
We recognise that financial inclusion is one of the key elements in addressing uniquely South African challenges, in addition to broader empowerment objectives.
Over the past five years, Sanlam Sky, which focuses on the entry-level market in South Africa, significantly outperformed competitors in life premium and earnings growth, which is an indicator of our ability to enhance financial inclusion.
Sanlam’s flagship vehicle for transformation is the Ubuntu-Botho empowerment partnership with Ubuntu-Botho Investments, which was arguably one of the most successful transactions of its kind in South Africa at its maturation in 2013. The partnership is an investment vehicle which aims to use its empowerment credentials, balance sheet strength and the business track record of its partners to invest in financial services distribution businesses, to take strategic equity stakes in underlying financial services product providers and to acquire majority or significant minority interests in non-financial services businesses. Several joint business opportunities are currently under consideration.
Sanlam’s Accelerator project is a further example of impactful transformation initiatives. The project develops selected, black-owned SMEs within Sanlam’s supply chain and target markets. By providing leading practice growth support, core business interventions and investment funding to these businesses, the project is transforming Sanlam’s supplier profile. Currently we focus on businesses in sectors such as: marketing, events and communications; cleaning and waste management; autoworks; information technology; and construction.
The Board promotes and supports high and ethical standards of corporate governance and, in doing so, also endorses the principles of King IV™. The Board will remain committed to the full implementation of King IV™, or an appropriate local equivalent outside South Africa, as applicable, across the Group. Regarding the year under review, the Board believes that the King IV™ principles are entrenched in the internal controls, policies and procedures governing corporate conduct in the Group’s major operations in South Africa.
We made the following Board changes during the year:
We were also saddened by the passing of director Paul Bradshaw, who was involved with the business here and in the United Kingdom for over a decade.
Sanlam has the benefit of an experienced and committed Board that actively supports a strong executive team. I would like to thank all of them for the many instances of leadership and support that they provided during a challenging and exciting year.
Sanlam’s resilience is testimony to a value system and work ethic that has stood the test of time for almost 100 years. Two features remain evident:
A particular word of appreciation to Desmond, who was appointed as chairman of the Board in 2010 and provided exemplary leadership for the past seven years. We had great appreciation for his substantial skills and vast experience in financial services and wish him all the best for his retirement.
Also a special word of thanks to Flip and Clement for their valuable contribution over the years.
Last, but not least, I would like to extend my thanks to our clients, Sanlam’s management, employees and intermediaries, as well as our shareholders and other stakeholders for their support in 2017. Thank you for choosing Sanlam as your Wealthsmiths™ partner in creating, managing and protecting wealth for individuals, organisations and society.