Our purpose is to build a world that supports people in living their best possible lives through financial resilience and prosperity
Our strategic intent is to create sustainable value for all stakeholders.
Our vision in South Africa
Lead in client-centric wealth creation, management and protection in South Africa
Our vision in Africa, India and Malaysia
Be a leading Pan-African financial services group with a meaningful presence in India and Malaysia
Our vision in developed markets
Play a niche role in wealth and investment management in specific developed markets
Profitable top-line growth through a culture of client-centricity
Enhancing Sanlam’s resilience and earnings growth through diversification
Extracting value through innovation and improved efficiencies
Responsible capital allocation and management
Continuous transformation is central to Sanlam’s ability to adapt to a changing world and underpins all of the strategic pillars.
Sanlam is one of the largest non-banking financial services groups in South Africa. Our aim is to occupy the top position in terms of profitable market share in all segments in which we compete. We defend our leading position by being client-centric and responsive to the need for stability and protection in volatile market conditions. Our distribution network, with increased omni-channel capabilities, provides an additional layer of security through sound advice and personal relationships.
We are a leader in risk products and life insurance in the middle income market. According to the 2017 Swiss Re Affluent Report, we have the largest market share by sum insured (BrightRock included) in South Africa. The traditional risk market in South Africa is not growing and therefore highly competitive. BrightRock’s contribution has enabled us to retain a leadership position and grow market share.
Glacier, SPF’s wealth and investment unit, is one of South Africa’s leading investment platforms in the traditional and mature affluent market with a leading intermediated model. Glacier Invest is currently the largest Discretionary Fund Manager (DFM) in South Africa according to assets under management.
Sanlam’s leadership position in retirement products will be challenged by new regulation anticipated through the phased implementation of the Retail Distribution Review (RDR) by the Financial Sector Conduct Authority (FSCA) and default annuity options in retirement funds. RDR will bring changes to the distribution of financial products and the provision of financial advice by financial institutions. We have, however, positioned our businesses to use the changes in regulation as an opportunity to gain market share in the retail and institutional space rather than a threat.
SIG has a leading position in private wealth management in South Africa. It pioneered index-tracking investment capabilities in South Africa with Satrix, which is the largest equity index-tracking provider in the country. SIG’s Implemented Consulting is also a market-leading solution widely used by financial planners and consultants.
Santam is the leader in general insurance in South Africa with a market share of more than 22%. The Santam Specialist business units include Santam Marine, Santam Transport, Santam Agriculture and Corporate property, engineering and liability, all market leaders in their insurance classes in South Africa.
Sanlam also leads by reputation: Sanlam was identified as the top long-term insurer by 52 short-term and 72 long-term insurance independent financial advisers (IFAs) in South Africa in a survey conducted by SBG Securities.
The proposed BBBEE transactions, combined with achieving a level 1 status in terms of the FSC scorecard, will place Sanlam in a strong, market-leading position in terms of empowerment and BBBEE credentials.
The 2018 adjusted Return on Group Equity Value (RoGEV) per share of 19,4% exceeded the target of 13% despite challenges in a number of markets. RoGEV remains the most appropriate indicator for Group performance as it incorporates the results of all the major value drivers in the business.
The Sanlam Board approved a 7,6% increase in the Sanlam dividend to 312 cents per share, in line with the objective of real dividend growth of 2% to 4% per annum.
Sanlam has a number two position in the entry-level market in South Africa despite good organic growth through Sanlam Sky. We are driving towards a leadership position in this market segment through continued accelerated organic growth in Sanlam Sky, our partnership with Capitec and the launch of African Rainbow Life in 2019.
The proposed BBBEE transactions will address our lagging position in third-party asset management, with African Rainbow Capital (ARC) potentially acquiring a share in this business. Sanlam’s improved BBBEE credentials will also create further momentum for our healthcare and employee benefits offerings in the local corporate market.
SIG is working towards leading positions in absolute return and balanced funds by using the Sanlam distribution model. Alternative asset classes provide further opportunities to attract profitable new flows and clients. SIG made progress by acquiring a controlling stake in Catalyst Fund Managers, a specialist in managing listed real estate investments in South Africa and globally for retail and institutional investors. The acquisition diversifies and strengthens SIG’s current asset management capabilities and expands its product offering.
Profitable top-line growth through a culture of client-centricity
Extracting value through innovation and improved efficiencies
Enhancing Sanlam’s resilience and earnings growth through diversification
Responsible capital allocation and management
Sanlam historically had mature and market-leading positions in Namibia and Botswana. The dominance of these markets within SEM is shifting following the Saham Finances acquisition.
The acquisition positions Sanlam as the largest Pan-African financial services provider on the continent. Sanlam is among the top three market leaders in 11 African countries for life insurance, and 8 African countries for general insurance.
To achieve a meaningful presence, we have set ourselves a target to be in the first, second or third positions in key markets.
Being a leader in Pan-African financial solutions is built on a partnership model that relies on local partners to support and guide us. It also entails building networks across country borders to facilitate cross-selling and effective servicing of multinationals.
In India, Sanlam has a meaningful presence through its 26% share in Shriram Capital Limited (SCL). SCL is the holding company for the financial services and insurance entities of the Shriram Group, including Shriram Transport Finance Company, the largest non-bank asset financing company in India, and Shriram City Union Finance, a leader in retail finance across a wide range of products. On a consolidated basis, SCL has an overall client base of 7,5 million, 35 000 employees across 2 800 offices, and assets under management (AUM) of around US$11 billion. We also have direct stakes of 23% in Shriram Life Insurance (SLI) and Shriram General Insurance (SGI), with the remaining interest in these businesses held by SCL.
Growth in life insurance in India is ahead of industry growth levels. SLI and SGI have 768 683 and 2,1 million clients respectively.
Sanlam entered the Malaysian market in 2013 by acquiring a 49% stake in the general insurer Pacific and Orient Insurance Company Berhad. At the end of June 2014, Sanlam entered the life insurance sector by acquiring a 51% interest in MCIS Insurance Berhad. Economic growth in the region is strong, which provides the Group with a sustainable alternative income stream and new business growth opportunities. These businesses are receiving dedicated focus as they are not yet meeting our return hurdles.
We are now entering a phase in which we need to build scale to consolidate and protect our leadership position in Africa, in particular those areas where individual businesses are not yet meeting their RoGEV hurdle rates. Our focus is to pursue organic growth by extending our product and service offerings or increasing shareholding where opportunities arise. This includes developing a comprehensive employee benefits and health offering.
Where we are lagging, we explore acquisitions of companies that can bolster our market share. An example of this was the acquisition of Lion Assurance Company Limited in 2017. The acquisition ensured a market-leading position for SEM in Uganda.
Kenya remains a work in progress as it has not achieved our targets. A new group Chief Executive and increased support from the SEM cluster team are aimed at improving performance.
To ensure dedicated focus on the Pan-African opportunity and to address the areas where we lag, operational responsibility for the SEM countries have been split between Pan Africa and other emerging markets (India, Malaysia and Lebanon). The current SEM management team will be responsible for Pan Africa, while the Group Financial Director will take responsibility for other emerging markets, including the evaluation of future strategies for these regions outside of Africa.
In the UK we have seen a performance turnaround following a restructuring, a few acquisitions and further capacity building.
Most recently we acquired a financial planning business that brought £60 million of assets under management into the business. This strengthens our position as a specialist in providing holistic financial planning services for high net worth individuals and businesses. We have a competitive and award-winning set of products for our clients in this market. Specific focus will be placed on developing appropriate products to capitalise on the opportunities of our African client base.
The UK business requires scale to entrench a niche position and to attract assets and skills. We continue to explore acquisitions and partnerships in this regard.
We continued to execute on all our strategic pillars. Progress was impacted positively and negatively by factors in our economic and regulatory environment. Detailed information about each strategic pillar is provided in the strategy section whereas the cluster reports explain how each cluster supports and implements the pillars according to specific focus areas.
The execution of our strategy is supported by a remuneration approach to incentivise behaviour that meets targets. Short- and long-term strategic objectives are measured and rewarded within a framework that promotes fair, responsible and transparent remuneration. Our blended approach mitigates excessive risk-taking and balances longer-term strategic objectives with short-term operational performance. Read more about our remuneration approach and implementation in the report.
Exco members have key performance indicators that correlate directly to the four strategic pillars. All are measured on growth measures appropriate for their businesses (read more in the remuneration section). Exco members also have employment equity targets where relevant and are expected to drive inclusivity and a “One Sanlam” culture.
Client-centricity is the bedrock of our success. This means that we continuously make adjustments for shifting client expectations, including seamless user experiences, lower costs and more transparency. Maintaining client trust is also becoming more difficult in business.
We deliver top-line growth through organic growth (writing new business and retaining our existing clients) and strategic acquisitions. Solid growth was achieved by all clusters apart from SIG, which remains affected by cautious investors and weak markets.
SPF achieved overall new business sales growth of 4% on the back of new initiatives such as BrightRock, MiWayLife and Capitec. The funeral and credit life underwriting arrangement with Capitec was the most significant contributor to exceptional growth of 71% at Sanlam Sky. The Capitec partnership is delivering ahead of the business case and achieved more than half a million funeral policy sales in the nine months since launch to February 2019.
SEM delivered mixed results, with Namibia showing strong growth in entry-level market risk business and Nigeria also doing exceptionally well despite currency weakness. Saham Finances showed good organic growth in local currency in Morocco and Angola. Lebanon did well under very challenging economic conditions.
Côte d’Ivoire experienced some pressure on top-line growth. The East African region, however, disappointed with an overall weak new business performance. SEM has implemented mitigating actions through changes in senior management and increased central support.
SIG experienced strong inflows in Satrix index-tracking funds, with Satrix Managers consolidating its position as the leading business in the retail segment of this market. The international businesses also did well and attracted 57% higher new mandates.
SNT achieved commendable growth of 11% in gross written premiums in a competitive market.
SC excelled by more than doubling new life business volumes following large new investment-related mandates and strong recurring premium growth at SEB. The cluster also completed the acquisition of ACA with effect from 1 April 2018.
Diligent focus on client-centricity and the quality of new business written enhanced the resilience of the life insurance in-force book. Satisfactory persistency was maintained despite the economic pressures in the core South African and Namibian market.
We also measure client-centricity through the success of the Sanlam Reality loyalty programme. Sanlam Reality was voted number one for overall client satisfaction and value for money in the SAcsi 2018 survey and is the second biggest loyalty programme in the health and insurance sector, with over 265 000 members. A new app was launched this year, providing clients with access to exclusive benefits and real-time services.
Our commitment to client service is evident from the reports of the industry ombudsman in South Africa.
Sanlam’s proportion of total claims awarded in favour of clients is much lower than our relative market share.
Sanlam’s client-centricity is also evident in the number of claims and benefits paid to support client resilience and prosperity. SNT paid general insurance claims of R13,8 billion and Sanlam a total of R74,5 billion in the form of life insurance and investment fund benefits.
Sanlam’s predominantly intermediated distribution model creates growth opportunities for a range of advisers and consultants. R8 billion was paid in sales remuneration for our advisers and independent distribution partners (excluding amounts paid by associated companies). This is an increase of 12% compared to 2017. The total number of advisors and supporting brokers in SPF increased to 12 068 (excluding BrightRock), which provided income opportunities for an additional 402 individuals and brokerages compared to the end of 2017.
We continue to support our more than 240 Sanlam BlueStar practices in South Africa by assisting them to achieve higher levels of positive client experience. We are particularly proud of our initiatives that enhance client experience through an online distribution capability, including Glacier’s leading Investment Hub for intermediaries. This allows practices to adapt to the changing client needs for omni-channel delivery. It also positions Sanlam for the new regulatory environment to be rolled out as part of the RDR.
Two major transactions enable long-term execution of this strategic pillar. The Saham Finances acquisition serves as a game changer in diversification as it increases our exposure to the higher-growth Rest of Africa region, while enhancing the line of business profile with a shift towards general insurance. The package of BBBEE transactions approved by shareholders in December 2018 will introduce new empowerment groupings to the Group’s shareholding base and will position us well to gain market share in the South African market segments where we do not have a fair market share, including third-party asset management, employee benefits, health and the entry-level market.
Diversification drives earnings growth through an increased variety of income streams, balances capital requirements and positions the Group for relevance throughout client life cycles.
The benefits of diversification were reinforced during 2018 as the markets in which we operate experienced different levels of challenge and performance.
Diversification entails deliberate strategic choices. Sanlam has made the decision to not diversify by establishing or acquiring our own retail bank, but we partner with a number of banks. We continue to rather diversify our distribution channels through partnerships with banks to offer bancassurance, create new client value propositions, enhance their competitive positioning and provide us with access to new client pools.
Our diversification approach includes a strong emphasis on omni-channel initiatives as a way to reach, attract, retain and service clients while empowering intermediaries. We do this by providing enhanced business intelligence, which, in turn, strengthens our client-centric approach and competitiveness. Since non-traditional players compete in disruptive ways, we have to ensure that our offering and engagement with clients remain resilient and relevant. At the same time, we recognise that our physical branch infrastructure remains critical for financial inclusion and growth, particularly in the entry-level market in South Africa.
Operational efficiency is a focus area across all our operations, particularly during low market growth cycles. Low growth further inspires innovation as a way to attract and retain clients, while exploiting opportunities created by new legislation and technology.
Embedding new investments to exploit synergy and create efficiency was a key focus area. In SPF the working relationship with BrightRock is now well established, with the business exceeding new business targets. SPF will launch products in partnership with BrightRock under the Sanlam brand in 2019.
MiWayLife found good traction and made a welcome first-time contribution to VNB. While Indie digital sales had a lower pick-up than anticipated, it developed the digital client engagement capabilities on its platform significantly. The distribution and digital capabilities in these businesses make Sanlam well-placed to secure and establish affinity distribution partnerships with strong external brands. The first partnership of this nature was Capitec Bank in the funeral insurance market, and others are actively being explored.
Sanlam is still predominantly an intermediated business in South Africa, enhanced by omni-channel capabilities and supported by data analytics. In addition to innovation in business processes and products, we are working with advisers and consultants to use technology to adapt their client approach and engagements.
We continue building our digital insurer in Indie by focusing product innovation on client experience.
The business intelligence (BI) project, aimed at extracting value through big data and data analytics, is making good progress, with business demand for test cases exceeding our initial forecasts. The current focus is on using BI to improve underwriting accuracy, to have better and more targeted engagements with clients and to consolidate our data management. The latter is important in preparing for the extensive data requirements of the new International Financial Reporting Standard (IFRS) for insurance accounting (IFRS 17) that will apply from the 2022 financial year. Our BI initiative therefore creates a more explorative and interactive relationship with data, which will drive improved business performance in the longer term.
The BI project requires new skills, capabilities and a transformed culture. We explain how we are preparing for a next generation of employees in the section on our employee approach.
SEM is running a multi-year project to automate and standardise financial and actuarial reporting to improve efficiencies. Saham Finances is taking a leading role in using technology as an enabler for improved client experience through the establishment of a Digital Factory for Saham Assurance in Casablanca, Morocco. The team of 37 employees with skills ranging from 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. There are many opportunities to cross-pollinate innovation between Saham Finances and Sanlam.
SIG’s partnership with the Development Bank of the Netherlands, FMO, and South African infrastructure investment business, Phoenix InfraWorks, in the global clean energy asset manager, Climate Fund Manager (CFM), attracted a US$100 million commitment from the Green Climate Fund (GCF). The investment is spread across the Climate Investor One (CIO) Development Fund and Construction Equity Fund vehicles to enable the financing of renewable energy projects. With the support of GCF, CIO will be able to mobilise further commercial funds and build approximately 30 renewable energy projects over its lifetime, delivering an estimated 1 600 MW of additional capacity in 11 target countries.
In turn, CFM made a US$50 million equity investment in Cleantech Solar, the leading Pan-Asian supplier of renewable energy to corporates.
CIO gives SIG’s clients the opportunity to invest in a fund that has a positive impact on the environment, while benefiting from the unique profile of an asset class that delivers long-term assets to meet the long-term cash-flow needs of our clients.
We approach capital allocation responsibly, as Sanlam’s long-term sustainability depends on having a resilient balance sheet that can support our growth initiatives as well as withstand adverse conditions. This is a safeguard to our clients, employees, suppliers and broader society, and has built stakeholder trust in Sanlam for more than 100 years. Therefore, prudence is inherent in the Sanlam culture and capital allocation methodology.
Capital management is controlled centrally from the Group Office, which means businesses must compete for capital. We allocate capital to those areas where we expect a higher return within acceptable risk estimates. To enhance RoGEV, Group businesses are allocated an optimal level of capital and are measured against appropriate return hurdles.
We continuously investigate opportunities to optimise the capital base as the Group and the operating environment develop. This includes more sophisticated balance sheet management, changes to strategic asset allocation, and the most appropriate capital structure.
A new capital investment strategy was approved and is being implemented by the internal Group Estate committee. This entails centralising the management of market liquidity and optimising asset allocation within the broader estate profile, all within the Sanlam Group risk appetite.
Discretionary capital of R2,5 billion was released through the excess cash dividend cover in respect of the 2017 financial year as well as a reduction in the capital allocation to SPF and SC. The latter is largely attributable to more effective balance sheet management. We also conducted an accelerated book build process at the end of March 2018 with the new shares issued and listed in April 2018 to raise R5,5 billion (net of dividends paid) as partial funding for the Saham Finances acquisition.
Our intention in concluding the third phase of the Saham Finances acquisition was to fully finance the transaction through shareholders’ equity, in line with the Group’s capital management philosophy. Given the level of discretionary capital available, this necessitated a new share issuance. This was the first equity raising since demutualisation in 1998 and presented us with a rare opportunity to introduce further empowerment partners to our shareholder base. As it takes some time to structure an empowerment issuance, the equity raising was split into two phases – an initial issuance to de-risk the transaction, and a second phase to introduce a broad-based empowerment component.
To de-risk the acquisition, we issued 3% new shares. This placed us in a position to temporarily finance the remainder of the transaction through debt while we finalise an empowerment issuance, without putting the Group’s credit rating at risk. The second phase, constituting a further 5% issuance to a broad-based black empowerment vehicle, was approved by shareholders in December 2018. This equity raising will provide the remaining funding for the acquisition and will restore the discretionary capital portfolio to an appropriate level for future bolt-on acquisitions.
Following the Saham Finances acquisition, SEM launched an initiative to assess the cluster’s risk appetite in terms of capital and solvency against minimum requirements for capital in each market. There is an opportunity to improve balance sheet management to extract discretionary capital.