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Cluster Report 2018: Sanlam Emerging Markets

About SEM

SEM leverages its expertise and experience at a cluster level to provide a wide range of services and resources to support its in-country operations, which in turn provide clients with innovative financial solutions. Capacity and technical expertise are sourced from Santam, SPF and SIG as necessary. These support services and resources include the following:

  • Management, operational and actuarial services
  • Knowledge and best practice sharing
  • New product development unique for each target market
  • Technical and information technology services
  • Omni-channel distribution capabilities
  • Capital for growth
  • Domestic and global asset management
  • Alternative assets like property asset management and equity funds
  • Strategic management services
  • Operational monitoring and support
  • Cross-selling opportunities with insurance businesses
  • Oversight by SEM retail credit committee
  • Capital for growth
  • Leveraging relationships with international and regional brokers
  • Bancassurance:
    • Advice and support on strategic and operational management
    • Sharing of knowledge and best practices
    • New product development

SEM contributed 23% to the Group net result from financial services and 33% to GEV, making it the second largest cluster in the Group based on earnings and the largest based on GEV.

Key Facts and Figures

Net result from financial services

R2 038 million (2017: R1 793 million)

Contribution to Group net result from financial services

23% (2017: 21%)

Number of employees (subsidiaries)

4 730 (2017: 1 947)

Number of countries in Africa


Number of subsidiaries/businesses


Number of supporting staff at cluster level


An Unmatched African Footprint and Opportunity

Strategic Intent: To Become a Leading Pan-African Player with a Meaningful Presence in India and Malaysia

SEM is placing increased emphasis on leveraging its expanded footprint through organic growth of our existing businesses with a particular focus on key markets. In addition, our unmatched Pan-African footprint provides us with a unique opportunity to service multinational corporate clients and intermediaries. This is augmented by an in-country retail and corporate focus. We provide in-country business partners with expanded central support capabilities to execute initiatives. We remain committed to structural growth opportunities through increasing stakes in existing businesses as these arise, expanding product lines, and entering selected new markets. The primary criteria for entering new markets are market potential in terms of size and growth prospects, low financial services penetration, and relative political stability. In this regard, Egypt and Ethiopia will be considered at an appropriate time.

Governance Commitments

We comply with all relevant local regulations and apply the following governance approach:

  • Board of directors
  • Audit and risk committee
  • Human resources committee
  • Acting with integrity
  • Growing shareholder value through innovation and superior performance
  • Leading with courage
  • Serving with pride
  • Caring because there is respect for one another
  • Risk management policy
  • Risk appetite statement
  • Capital management policy
  • Financial crime-combatting policy
  • Compliance policy
  • Branding
  • Communication
  • People management
  • Financial and other reporting
  • Information and IT
  • Assurance providers

Creating Resilience through Diversification

SEM creates resilience by offering diversification for the Sanlam Group and through support for businesses within the markets where we operate. The spread of markets, products and product lines offered by the cluster is the single biggest contributor to resilience and risk mitigation.

By focusing on standard system implementation, regulatory compliance, financial management and actuarial expertise, we are able to strengthen the in-country SEM operations. Our ability to transfer skills to those markets and standardise offerings creates value for business units, staff, clients and broader society.

The SEM Opportunity

GDP growth in most countries in Africa exceeded that of South Africa in the last five years. Many also outperform emerging markets in the rest of the world. Africa is experiencing solid economic growth, resulting in a burgeoning middle class with increasing disposable incomes in many markets. Insurance penetration lags income growth, creating an attractive opportunity for wealth creation and protection solutions. This is compounded by a young population becoming a large and aspirational future workforce with high technological adaptation. SEM is well positioned to address this gap.

We have developed an understanding of the needs of different markets, and the ability to design products and distribution channels that are effective and resilient. In Nigeria, we started a greenfield operation seven years ago; today we are one of the leading individual life insurers in the market.

SEM does not want to be seen as a South African company doing business on the continent – we want to be seen as a Pan-African company.

We are also seeing a number of regulatory changes unfolding on the continent, including aspects of retirement, employee benefits and even specialist areas such as marine insurance becoming compulsory. This supports the insurance business proposition.

Following the Saham Finances acquisition, the SEM footprint is mostly complete. We now have an unmatched position in terms of competitors and have a significant multinational opportunity. SEM’s growth plans included creating capacity in major business centres such as Paris and London to build relationship with multinationals active on the continent. We are now firmly positioned to be the go-to partner for such companies, with new mandates concluded generating present value of future earnings of US$13 million.

2018 Operational Performance Overview

The Saham Finances transaction was a milestone for the cluster that was welcomed in the countries where Saham Finances operates. Sanlam representatives experienced positive feedback throughout the continent as employees and partners embraced the opportunity to be part of a leading non-banking financial services provider in Africa. It brings new impetus to the in-country business and to individual client relationships.

Performance was characterised by robust new business volumes in most of the SEM operations, with the exception of East Africa, which delivered disappointing results. Negative impacts included some corporate debt failures in Kenya and changing commission regulations in Tanzania. Ongoing challenges across the continent include significant fluctuations in local currencies and the ensuing liquidity problems due to foreign exchange shortages, notable in Angola. The impact of operational challenges in some markets were balanced by the geographic diversification of profit sources, which improved significantly following the Saham Finances acquisition. East Africa also disappointed from an operational earnings perspective, with most other regions making satisfactory contributions.

2018 salient features

  • Strategic focus on organic growth across all lines of business and conclusion of the Saham Finances acquisition
  • Extracting synergies from Saham Finances
  • Improving performance and mix of business in Malaysia
  • Growing the life portfolio – focus in most countries on increasing and optimising distribution and launching new products
  • General insurance earnings growth supported by structural growth (Saham Finances)

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

The New SEM Operating Model

The onboarding of the Saham Finances businesses is a critical success factor over the short term. With the onboarding, we have to manage the expanded scope and complexity of the cluster.

A new operating model was designed to optimise the relevant strengths of the respective teams and to achieve the strategic intent relating to the Saham Finances business, as highlighted above:

  • SEM had a strong life footprint and expertise, while the general insurance portfolio is largely made up of licences and early start-ups.
  • Saham Finances had strong general insurance expertise predominantly in North and Francophone Africa.
  • Santam has strong general insurance expertise in South Africa, as well as specialist and reinsurance skills.

The confluence of these skills and the expanded footprint affords the Sanlam Group a number of opportunities by leveraging the respective skill sets. This is a key input into defining priority areas within the new operating model.

Growth opportunities following the acquisition:

  • Growing the current Saham Finances life insurance portfolio with SEM life insurance products: Life insurance currently contributes less than 20% of Saham Finances. Sanlam’s life insurance expertise elsewhere in Africa positions us well to grow this line of business across the Saham Finances footprint, which spans across a number of markets with favourable demographic profiles, strong economic growth prospects and low insurance penetration. Focus remains on further accelerating growth in this line of business.
  • Using the Saham Finances general insurance expertise to grow the other SEM general insurance businesses in Africa: This will be implemented over time in line with Saham Finances’ operational capacity.
  • Expanding the Saham Finances product offering in assistance and health insurance across other SEM markets: SEM’s current health insurance offering in Zambia and Uganda have already been transferred to Saham Finances, with feasibility studies in respect of the roll-out of assistance business in Southern Africa progressing well.
  • Optimising reinsurance across the SEM general insurance footprint, while also expanding the general insurance specialist classes offering in conjunction with Santam. This will entail decreasing Santam’s economic participation in the SEM Africa general insurance businesses to 10%, and Santam focusing on the development of specialist lines and reinsurance.
  • Optimising capital management within the Saham Finances Group: Sanlam’s extensive capital management expertise will be utilised to identify and extract any excess capital in the Saham Finances operations.
  • Using the combined SEM and Saham Finances footprint to provide a compelling one-stop service offering to multinationals operating across the African continent.

The fundamental change to the operating model is to migrate from a SEM/Saham Finances structure with a regional approach to a line of business structure whereby Saham Finances will assume responsibility for the general insurance portfolio, including assistance and health. The newly created SEM life insurance business will assume responsibility for the life insurance portfolio, including asset management and retail credit.

The following design principles informed the new operating model:

  • Facilitate a transition from a SEM/Saham Finances to a life/general insurance operating model and structure
  • Prioritise synergies, with a focus on growth opportunities
  • Minimise disruption to the businesses
  • Protect and build on the strength in the two original businesses
  • Provide more support and control from the centre
  • Ensure strong governance and ethics

The new SEM Life Insurance will be responsible for 24 businesses in 24 countries and SEM General Insurance will be responsible for 26 businesses in 26 countries. SEM operates in 33 countries in Africa with a combined total of 50 businesses.

The SEM cluster Exco now comprises the SEM Group CEO, SEM general insurance CEO, SEM life insurance CEO, head of multinational and functional support executives, who will provide support from the centre.

Malaysia and India will continue to be reported as part of SEM, but operational responsibility has been transferred to the Sanlam Group Financial Director, Heinie Werth, to ensure dedicated focus by the SEM executive team on the Africa opportunity. Given Santam’s increased financial participation, it will drive the reinsurance and specialist insurance strategy and businesses in close cooperation with SEM General Insurance, especially in the multinational space. SEM General Insurance and Santam have agreed on the business model for the reinsurance and specialist businesses.

SEM Strategic Focus Areas

Key markets for life insurance

Botswana, Namibia, Nigeria, Zambia, Kenya, Tanzania, Morocco and Côte d’Ivoire are immediate focus markets. A formal project was launched to onboard the Saham Finances life insurance businesses.

Key markets for general insurance

Morocco, Angola, Côte d’Ivoire, Burkina Faso and Mali are key markets where general insurance growth is a priority. This entails organic top-line growth as well as improved market positions. The transformation of business processes through digital initiatives and process reengineering are the immediate priorities.

SEM’s most significant new business flow opportunity is in its multinational and specialist insurance offering. The target market is the top 500 international companies operating in Africa, including Pan-African companies, as well as large national companies that require property, onshore downstream energy, engineering, corporate liability and marine solutions.

Reinsurance offers an opportunity to capture additional profit pools along the value chain by building a Pan-African reinsurance offering. Santam will lead the drive with key role players being Santam re, Saham re and Continental re.

Where opportunities arise SEM will increase shareholding to reduce minority shareholding, enabling more control and influence while increasing its share of profits and dividends, but with partners maintaining a meaningful interest. Organic growth will remain the dominant approach. However, bolt-on acquisitions to gain in country scale remain an option in life and general insurance.

Capital is managed as a strategic imperative at portfolio level. Through the optimisation of capital efficiency, RoGEV is enhanced.

The objective is to grow the Sanlam brand in a relevant way in the Sanlam branded countries. Rebranding of Saham Finances businesses will take the form of a phased brand transition. There have been several interventions aimed at building alignment and adherence to the Sanlam Group values and Code of Ethical Conduct with Sanlam branded subsidiaries. These activities will be supported by HR interventions to ensure alignment of HR practices and procedures.

The HR focus for the onboarding of Saham Finances businesses will be on an assessment of organisational culture and employee engagement, as well as talent retention, attraction and employee development schemes.

Governance, risk management and compliance are key aspects to ensure sound and prudent management of the business given the increased scope and complexity of the SEM cluster. The evolving regulatory landscape further requires strong compliance and risk management capability at the centre. SEM has appointed a Chief Risk Officer to oversee the compliance and risk management functions in response to the increase in regulatory monitoring.

The governance approach to onboarding Saham Finances businesses will focus on board structures, board representation, the introduction of Sanlam Group governance and compliance policies and frameworks. Oversight will be provided by a number of existing Sanlam and SEM committees such as the Group actuarial forum and the SEM retail credit committee as well as the establishment of new oversight committees such as the general insurance risk forum, a reinsurance oversight committee and a specialist insurance business management committee. SEM has also recently established an estate and ALCO committee to oversee capital and asset management.

Strategic Intent per Saham Finances Line of Business

To become the go-to partner for international and Pan-African programmes as well as focus on strong retail in-country strategies. In terms of motor insurance, building an auto factory covering the full insurance value chain. This digital process automation is focused on the delivery of market-leading client centric solutions.

To improve current local product offerings and launch new attractive and profitable products. Distribution models will be reassessed and optimised, leveraging Sanlam’s experience in life insurance, while developing new partnerships at local and central level.

Become the first profitable Pan-African healthcare insurer.

Focus on the launch of an assistance platform in Southern Africa, the launch of a new claims management tool and optimising the cost of suppliers in the automotive ecosystem.

Strategic Focus Areas In Respect of the Saham Finances Businesses

Accelerating organic growth based on:

  • a unique and integrated network in which profitability must be accelerated
  • a strong retail strategy to fully impact each local market; and
  • a multinational approach – the one-stop-shop strategy.

Improving market positions in three to four countries

Improving service via business transformation projects to create significant competitive advantages in main business lines of motor, health and life by:

  • digital initiatives and process reengineering
  • shared platforms for assistance and third-party administration; and
  • Increasing profitability.

Strategic Short- to Medium-term Priorities

  • Continue with the shift in focus from acquisitive to accelerated organic growth through superior execution and enhanced strategic alliances
  • Improved distribution
  • Deliver on corporate opportunities in Africa in support of retail and commercial business growth
  • Increase visibility of Sanlam brand as a partnership brand for markets and our employees
  • Realigning Santam interests in SEM general insurance businesses with focus on reinsurance and specialist
  • Increase collaboration on human resource development across the cluster
  • Continue focus on governance, compliance and ethics
  • Explore industry consolidation, increased shareholding or strategic partnerships where it makes sense

Case Study: Digital Factory Drives Innovation and Change

A highlight was the establishment of a Digital Factory for Saham Assurance in Casablanca, Morocco. The team of 37 employees with skills ranging from data scientists, IT experts, marketing and sales to actuarial is responsible for the transformation of the company’s processes. Their goal is to implement a client-centric vision.

The Digital Factory puts the clients at the heart of Saham Assurance’s processes, enabling the business to innovate quickly with short decision cycles and a culture of experimentation. They delivered, for example, Arabic rather than French contracts within a few weeks.

The creation of the Digital Factory represents a true innovation in the insurance sector in Morocco. The team co-creates in agile mode, delivering new products, processes and solutions that are dedicated to improving the client’s journey. They are targeting opportunities throughout the value chain, including client acquisition, client management, claims management, and omni-channel client solutions.

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