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Cluster Report 2018: Sanlam Personal Finance

About SPF

SPF provides retail life and investment solutions in South Africa. The cluster consists of the following:

  • Distribution, which provides access to and builds relationships with clients through an omni-channel capability
  • Four product-focused businesses, encompassing single premium, recurring premium risk, recurring premium savings and funeral solutions
  • A central shared services unit
  • A closed-book business, managing products closed for new business
  • Strategic Business Development, Human Resources, Actuarial and Finance

SPF is the largest cluster in the Group measured by operating profit, with a 45% contribution to net result from financial services. According to a 2017 Swiss Re report, SPF leads the South African risk business market in terms of sum assured (including BrightRock). In 2012, SPF was in 5th position.

Key Facts and Figures

Net result from financial services

R4 033 million (2017: R4 235 million)

Contribution to Group net result from financial services

45% (2017: 49%)

Persistency (Risk, Savings, Life Investments and Closed Book) – % in-force lost

5,4% (2017: 5,6%)

Number of employees

6 903 (2017: 5 767)

Employment Equity indicator

7,33 out of 12 as defined in FSC

Key Strengths

  • SPF has a well-established distribution network consisting of 6 469 advisers and 8 796 (including BrightRock) supporting brokers throughout South Africa. They receive dedicated support to market SPF products to all income groups.
  • SPF has strong, competitive products in every product category – from single-premium investments to savings and funeral products. These are complemented by new, innovative offerings through MiWayLife, Indie and BrightRock.
  • Distribution partnerships with a variety of organisations, including most recently Capitec.
  • SPF is achieving efficiencies and transforming the business through business intelligence, robotics and omni-channel capabilities.

Strategic Intent: To Become a Leader in All Retail Market Segments in South Africa

SPF is focused on achieving profitable growth in each of its market segments through innovation and expanded distribution capabilities that enhance new business and deliver superior client retention. Specific focus is placed on those segments where Sanlam does not have a fair market share, namely the entry-level market (all products), higher middle income market single premium savings and, from a geographic perspective, the Gauteng province.

Innovation aims to harness digital and data analytics opportunities to produce simpler client journeys. Refinement of distribution channel models and further capital optimisation will continue in response to regulatory developments. Delivering value for money in a wider and differentiated product set is key for client acquisition. This requires agility and speed of execution.

Enhanced digital capability is also harnessed to drive client experience and retention, as well as back office cost efficiencies. Continued progress in transformation of employee and management demographics remains a priority and a competitive enabler.

Creating and Protecting Wealth for Clients

SPF accompanies clients through their financial lives and provides appropriate advice and solutions along the way. Our role is to help them stay the course over time, starting with building their asset base, saving and managing their risks – all towards the desired outcome of creating and protecting wealth. SPF assists in pooling capital from clients. By growing and managing the pool, we are able to provide capital at times when things go wrong.

We provide wealth protection through risk products to ensure that our clients are financially secure when a crisis should arise. This also means that we advise our clients as they move through life and into retirement to adapt from more aggressive wealth growth to protecting their wealth. Our advice process is geared to ensure that our advisers and brokers properly understand and meet clients’ needs.

We have the widest range of risk products in the market. This has been SPF’s core offering, which we have diversified to cater to different needs and timelines. Our portfolio now includes alternative options and channels through BrightRock, MiWayLife and Indie.

2018 Operational Performance Overview

SPF delivered an acceptable performance in an environment of low economic growth and weak equity market performance. The cluster’s most significant long-term challenge remains to attract new business volumes to replace its legacy closed book. The latter included policies that were written at much higher margins than what is currently being offered. SPF addressed this challenge over the past three years by making acquisitions such as BrightRock, which provides non-conventional risk-based options, investing in new ventures, Indie and MiWayLife, and entering into a joint venture with Capitec to provide funeral cover. African Rainbow Life has been under development in 2018 and will launch in the first half of 2019, providing further investment in the entry level market.

Therefore, SPF’s performance relies on a continuous balance between investment in new business growth and maintaining continued operating profit growth, particularly in anticipation of the impact of RDR in the next few years. Digital transformation remains a critical growth capability.

2018 salient features

  • Further improvement in new business performance:
    • Overall solid increase in volumes
    • Optimised intermediary sales tools and collateral
    • New ventures: Africa Rainbow Life, BrightRock, MiWayLife, Capitec and Indie
    • Strong VNB growth in line with double digit life new business growth
  • Operating profit under pressure due to new business strain, investment in BrightRock and negative market movements

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

Sanlam Sky focuses on funeral insurance business

In 2017, the business unit benefited from a number of large new schemes written by Safrican and the biennial renewal of the Zionist Christian Church (ZCC) scheme. This year, new business was driven by the traditional individual life intermediary channel and the new arrangements with Capitec Bank around credit life and funeral products. Funeral product sales exceeded targets and the average premium was higher than expected. This is due to the unique features of the product, which includes up to 21 beneficiaries and competes effectively on simplicity and price. Sales of Capitec funeral policies reached half a million since launch in February 2019. Sanlam Sky’s sales and persistency were not negatively impacted by Capitec.

African Rainbow Life is set to launch in the first half of 2019 with a worksite-based channel offering life, disability and dread disease benefits. This channel entails a permanent intermediary presence at employer worksites. African Rainbow Life will be an expansion of the Secure Life plan built onto Sanlam Sky’s administrative platform.

The recurring premiums sub-cluster is responsible for all recurring premium risk and savings business.

Included in the sub-cluster are: Sanlam Individual Life (traditional recurring premium risk business), Sanlam Savings (traditional recurring premium savings business), Closed Book, BrightRock, MiWayLife and Indie.

Single premium sales to the recurring premium client base is also included in this sub-cluster.

Sanlam now has two product offerings to suit any risk insurance need – Matrix and BrightRock. Supported by Sanlam’s technical expertise and capital, BrightRock is showing accelerated growth. Several further initiatives are underway, including the development of an investment product line and the launch of a focused BrightRock tied agency force.

Sanlam Now was launched towards the end of the year as a complete online acquisition process for three Matrix Express products. We also launched a cashback benefit on income protector and the Cumulus Echo Centenary Special in June to coincide with the Sanlam Centenary celebrations.

MiWayLife made good progress in refining its model to ensure sustainable growth.

Indie is now regarded as one of the best digital insurance platforms in the market. Our digital distribution allows a client to buy an Indie policy in under 10 minutes through multiple channels, including face-to-face, directly via our website or on partner websites and platforms. However, sales conversions are still lagging targets. Indie’s core strength lies in its design capability and speed of execution. This increasingly positions Indie as a platform for digital engagement under the Sanlam brand. It has also become evident that a partnership approach is critical for success. We secured such a partnership with Bonitas, whereby SPF will be providing and enhancing the Indie value proposition to Bonitas clients through direct and intermediated channels.

Glacier incorporates single premium life investments and the Linked Investment Savings Plan platform (LISP)

Glacier is one of the leading LISP platforms in the South African market and excels in its technology, service and leading investment solutions. It has a unique positioning in being able to blend a LISP offering with guaranteed-type capabilities.

Glacier launched Glacier Invest in partnership with SIG to assist financial intermediaries in managing investment portfolios and creating efficiencies in their practices. It is currently the largest discretionary fund manager (DFM) in South Africa by assets under management.

Glacier Invest’s solutions, which include wrap funds, are managed by a team of investment professionals and help to reduce the intermediary’s advice risk by creating solutions tailored to the investment needs of the intermediary’s clients.

Strategic business development focuses on Sanlam Personal Loans and Sanlam Reality, and is an incubator for new initiatives

Sanlam Personal Loans had a good year, growing its loan book by 5% while maintaining quality.

Sanlam Reality performed in line with expectations. Good progress was made in measuring the value created by Reality for Sanlam, which included an analysis of the lifetime value created for members vs non-members. Reality plays an important role on rewarding many of Sanlam’s loyal and valuable clients.

Strategic Short- to Medium-term Priorities

  • Increasing productivity through an improved worksite offering in the entry-level market
  • Increasing market share in the middle income and affluent segments through product innovation and by leveraging the portfolio, including MiWayLife, Indie and BrightRock
  • Offering best-in-class client value for savings products
  • Further enhancing the full suite of integrated offerings at Glacier
  • Continue to build our multi-channel, digitally-enabled distribution footprint across all segments
  • Deepen our partnerships with Capitec and others
  • Harness digital to improve client experience while achieving further operational efficiencies and productivity improvements, including through robotic process automation

Case Study: Digital Innovation at Work

Sanlam is the first South African insurer to join Plug and Play, the world’s largest global innovation platform, as a core insurtech partner. Plug and Play facilitates the acceleration and investment in start-ups, matchmakes start-ups and corporations, provides flexible co-working space in the heart of Silicon Valley and hosts major industry events that unlock great networking opportunities.

SPF aims to use Plug and Play to enhance the delivery of intermediary value-adds by using digital technology. This is based on clients’ requirement to switch seamlessly between their intermediary and Sanlam according to their circumstances.

SPF employs a number of approaches on our digital journey:

  • To scan the environment, and to learn and test new ideas and concepts, we leverage our relationship with Plug and Play
  • In some cases, to build new solutions or create internal “start-ups” – examples include Indie, Go Cover and MiWayLife
  • Ultimately, it is crucial that our core Sanlam businesses be digitally transformed

Indie is working to digitally transform the client experience of insurance. Indie’s capabilities include:

  • Digital onboarding and underwriting
  • A digital product suite, including a built-in reward mechanism
  • Sales tools for intermediaries (still in pilot phase)
  • Sales support via chat and voice
  • Partnership technology

Sanlam Go Cover is a personal insurance platform that offers on-demand accidental injury and death cover. It was launched in December 2016 as the world’s first on-demand personal cover platform, offering instant cover for up to 24 hours, from R10 for R100 000 to R30 for R1 million. This year a dynamic platform solution was launched, offering cover of more than 30 days, group purchases, and recurring and custom cover, accompanied by dynamic pricing, benefit and risk adjustment.

The Glacier Investment Hub has set the benchmark for portfolio management in South Africa and gives Glacier and Sanlam a leading edge. The hub makes managing client information easy by enabling intermediaries to create and maintain details from one central place. A variety of client documents are imported from an external management system and stored on the hub.

Intermediaries can:

  • use the search filter or advanced search to find clients, create model portfolios by selecting funds, allocating percentages and defining the risk levels and benchmarks, analyse and compare different portfolios and wrap funds, and create customisable reports to present to clients
  • prepare a quick quote or customised proposal for a client’s new or current investment – and complete the application form through an easy to use web-based front end that guides the intermediary through the steps; and
  • submit investment proposals and applications with a straight-through, paperless process that allows clients to sign digitally. When filling in information, there’s no need to recapture data such as client details.

Since inception, the hub has achieved a 70% adoption rate. Less than 30% of quotes are done by the call centre – previously this was above 60%. On average 15% of cases use the full segmentation, targeting and positioning process.

E-sign capability has become part of the business process in SPF Distribution. It allows the client to sign documents electronically in a secure and authenticated way, removing the need for an intermediary to visit a client just to obtain a signature. E-sign offers convenience to clients, reduces paperwork and speeds up sales and other processes

Sanlam Sky’s self-service kiosks offer an easy, seamless service to clients who can get access via a touchscreen interface using a one-time PIN authentication. Clients can print forms for claims as well as their portfolio or tax certificates.

SPF introduced robotics in selected business areas to improve our client and intermediary experience, increase value and reduce costs. Robotics will augment and strengthen Sanlam’s workforce and free up people to do more meaningful work. SPF has started implementing robotics in some back-end policy administration processes in the Client Care Centre, targeting high-volume simple, repetitive tasks such as data capturing. It will also be used in other selected areas of the business.

The targeted outcomes are:

  • Significant improvement in service level agreements
  • Improved quality at speed
  • Reduced costs
  • Enhanced experience by combining humans and bots
  • Enablement of a broader digital strategy
  • Enabling people to do more meaningful work
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