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.