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.

Geographic diversification achieved:

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.