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Cluster Report 2018: Sanlam Corporate

About SC

Sanlam Corporate (SC) operates through the following:

  • Sanlam Employee Benefits (SEB)
  • Health solutions and products
  • Institutional offerings sourced from other clusters

SEB provides a diversified range of employee benefits solutions to employers, funds, members and pensioners including group insurance, umbrella funds, standalone fund administration, guaranteed investments, annuities, preservation options and a suite of consulting capabilities.

SC holds a 28,7% stake in AfroCentric Healthcare Assets, a subsidiary of the listed AfroCentric Investment Corporation that owns the country’s second-biggest medical aid administrator, Medscheme.

SC completed the acquisition of 100% of Absa Consultants and Actuaries in April 2018, now renamed ACA Employee Benefits (ACA). ACA housed the entire employee benefits offering of the Absa Group and provides consulting (investment, actuarial, health and benefit) and administration to retirement funds.

SC contributed 6% to the Group net result from financial services and 4% to GEV. SC’s share of the corporate market in Employee Benefits and Health in certain categories is less than 20%, presenting an opportunity for growth.

Key Facts and Figures

Net result from financial services
 

R580 million (2017: R558 million)

Contribution to Group net result from financial services

6% (2017: 6%)

Number of employees
 
 

1 494 (2017: 1 327)

Claims paid and increase in policy liabilities
 

R8 227 million (2017: R7 486 million)

Employment Equity indicator
 

6,56 out of 12 as defined in
the FSC

Invested in empowering trustees, advisers and employers

R6 million through insights drawn from the Sanlam Benchmark

Strategic Intent: to Become the Partner of Choice to Corporates, Funds and Advisors to Enable Financial Resilience

SC, comprising SEB and Sanlam Healthcare, focuses on delivering best of breed employee benefits and healthcare solutions to institutions ranging from SMME’s to large corporate clients. In addition, cross-selling to existing corporate clients and bundling products to unlock value are being pursued on a selective basis. Sanlam’s African footprint and structuring capability provide an avenue to engage multinationals based in South Africa on their continental employee benefits and health offerings. The Integrated Solutions team within SC targets a set of South Africa’s top companies and multinationals (South African-based and other) with corporate solutions that follow a needs-based approach, incorporating products and services from the other Sanlam Clusters as necessary in building a holistic client solution.

2018 Operational Performance Overview

SC delivered a strong performance in a year of tough operating conditions.

2018 was a challenging year where the industry has seen a general increase in the volatility of mortality claims experience. In light of this, SEB embarked on re-pricing certain clients, onsite intervention and enhanced filters and retraining.

The diversified nature of the business offerings within the cluster contributed to resilience, supported by efficiencies achieved through investments in digital technology and process redesign. ACA performed in line with expectations and the integration with Sanlam is progressing well.

SC aims to enhance the financial resilience of the society we serve, whether in health, life insurance or retirement, by influencing the behaviour of individuals through engagement. According to the 2018 Sanlam Benchmark research, while there has been significant progress in the structural evolution of the industry, South African retirement fund members are still at risk of poor retirement outcomes. When combined with the negative impact of financial stress on physical and mental well-being, we see the need to enable members to be more financially resilient in order to improve the quality of their lives building up to and through retirement. A key obstacle to wealth creation is the fact that the vast majority of fund members do not receive adequate information at critical junctures in their respective retirement funding journeys.

To address this challenge, SC launched a new offering that entails a free retirement benefits counselling service for members of qualifying retirement funds that Sanlam administers. The service allows funds to align with impending default regulations and has been crafted in a manner to optimise the impact of counselling on the critical decisions of fund members. This ensures that they are aware of their options and the impacts thereof at withdrawal or retirement stage. To date, this service has been taken up by approximately 20 funds as well as some stand-alone funds, the Sanlam Umbrella Fund and Sanlam Unity Fund. This number is expected to grow as we reach the go-live date of the default regulations. SC benefits by increasing preservation and annuitisation within SC product ranges or transitioning clients to other Sanlam products. The capability complements existing financial advice processes. The response from the market has been exceptional, with a much wider uptake than anticipated.

As financial advisers traditionally targeted high earners with retirement advice, a significant part of the market has been underserviced. By addressing this need in a cost-effective manner and using both tied and independent advisers, we are able to deliver financial inclusion and support the financial resilience of fund members and their communities.

We also experienced a strong uptake of the Progressive Smooth Bonus Fund launched in 2017. This was part of SC’s ongoing commitment to prioritise empowerment as a business goal and national economic necessity. The Progressive Smooth Bonus Fund is South Africa’s first 100% black managed, smoothed bonus product where all assets are managed by 3rd party black asset managers with risk management and the investment guarantee provided by Sanlam. The product addresses the needs of retirement funds that seek to drive transformation objectives within the asset management industry while retaining the financial resilience offered by the Sanlam guarantee and governance framework. This resulted in a significant investment of more than R2 billion from a mining provident fund.

A highlight was Sanlam’s gap cover being selected as the leading product for people younger than 60 in a comprehensive, first-of-its-kind gap cover survey by GTC. The survey included 20 providers of gap cover solutions, offering 84 plans covering 18 different product types.

SEB was the recipient of the Financial Intermediaries Association of Southern Africa’s (FIA) Employee Benefits Supplier of the Year Award for 2018. This is the 6th time in eight years that SEB has received this award and speaks to the consistency of the value proposition delivered to the market.

SEB is a leading provider of financial advice, insurance, retirement solutions and investment services to institutions across South Africa

SEB created first mover advantages through the Progressive Smooth Bonus product, free retirement counselling services to qualifying retirement funds and the launch of the MSCI World Tracker Guaranteed Product. The latter followed the increase in offshore investment allowance for institutional investors from 25% to 30%. This enabled retirement funds to take a greater portion of their asset pool offshore, thereby further diversifying their investment portfolios.

SEB continues to aim for profitable growth with a focus on pricing, margins, efficiencies and distribution. Benefits from the integration of ACA in terms of facilities and infrastructure are already evident and further synergies are in progress. No material clients were lost after the change in ownership and key employees were secured.

A new business was established with a dedicated team to address the unique opportunity created by the new retirement fund default regulations. This requires a holistic approach and relies on collaboration between SEB, ACA and the wider Sanlam Group.

Umbrella solutions remained a key focus area for SEB, with strong flows generated. This is a result of years of hard work and investment into crafting what independent intermediaries regard as the most advanced, differentiated and responsive umbrella fund in the country.

Significant inflows were recorded in the standalone administration business, which remains a strategic priority for SEB and is important offset to the inevitable conversion of smaller funds into Umbrellas.

The health portfolio includes managed healthcare and administration services.

AfroCentric continues to deliver the majority of the health portfolio profits – a relationship that remains key to the success of SC’s overall health strategy.

A Sanlam primary health insurance solution was launched in August 2018 and has seen good uptake from the market. This is complemented by an existing onsite clinic and wellness service.

We continue to drive growth in Fedhealth and Bonitas through collaboration and packaged solutions for targeted employers. This is based on an integrated offering that provides a one stop service and reduces employer costs. It also includes the rollout of Sanlam Reality to open and closed schemes.

The health portfolio continues to focus on further acquisition and scheme merger opportunities.

Integrated Solutions provides financial solutions underpinned by Employee Benefits and Health products.

The team has an active pipeline of opportunities and is driving internal cluster collaboration to increase potential clients’ employee value propositions. Alignment of strategic objectives and balancing of cross cluster pricing is progressing as an enabler to win and retain business while maintaining adequate margins.

SEB was also recognised as the Imbasa Yegolide Group Risk Insurer of the Year for 2018.

2018 salient features

  • SC experienced strong new business flows across product lines
  • Continued downward pressure on fees and administration cost was addressed by investments in technology and self-service tools that allow members to interact online
  • Effective leveraging of the AfroCentric partnership model continued
  • Pipeline of large South African-based corporates not currently Sanlam clients
  • Good progress on conversions of stand-alone retirement funds into the Sanlam Umbrella Fund
  • Progress with intra-group collaboration in South Africa

Read more about SC’s financial performance in the Financial Review.

Strategic Short- to Medium-term Priorities

  • Progressively improving market positioning in Employee Benefits and Healthcare
  • Leveraging Sanlam’s enhanced empowerment credentials to engage clients
  • Enabling profitable growth in SEB especially with respect to group risk
  • Supporting SEM over the longer term with in-country support for targeted corporates
  • Enhancing the customer experience through digitisation
  • Adapting our engagement model to interact with individuals within funds and employers

Case Study: Umbrella Fund Insights for 2018

The 2018 Sanlam Benchmark Survey included a separate study on umbrella funds. Ten years’ comparative data from 100 employers who participated in umbrella funds was analysed to obtain the following summary insights:

  • While costs have reduced and contribution rates have remained stable, the key issue that impairs retirement outcomes is the withdrawal of funds at resignation.
  • Transparency of fees remains problematic with investment fees being highlighted as a particular area of concern.
  • Lifestage structures remain the most popular structure for default portfolios.
  • Retirement benefits counselling was seen to be more relevant to millennials than financial advice at this particular stage of their retirement funding journeys.
  • The Sanlam Umbrella Fund was identified as the most advanced, differentiated and flexible fund in the industry by independent EB consultants.

The Sanlam Umbrella Fund was launched in 2008 with the number of participating employers in the fund growing to 4 743 by the end of December 2018. This growth ensures economies of scale that ultimately benefits members. Combined membership (Sanlam Umbrella Fund and Sanlam Unity Fund) numbers exceeded 200 000 and the fund had combined assets under management of R32 billion by 31 December 2018.

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