Sanlam’s strategy has remained largely consistent since 2003. Some refinements are applied each year following a Board review. Our purpose statement explains why we exist, the vision statements direct what we want to achieve, and our strategic intent defines the desired outcome of our strategy. The four pillars focus on strategic execution and RoGEV serves as the overall measure of success.
Execution relies on Sanlam’s ability to continuously transform. In combination with the continuous mitigation of risk, the pursuit of opportunities and focus on ethical leadership, values and culture, transformation ensures that we remain relevant in a changing world.
We define transformation broadly to include economic transformation to reduce wealth inequality, transforming employees to reflect the demographic profile of our client base and societies where we operate, transforming distribution channels and operations in line with technological and regulatory developments. Most importantly, we believe in transformation that is in line with the changing needs and preferences of clients.
Sanlam’s strategy is not unique. Our ability to consistently execute on the strategy in a sustainable manner has proven to be a key differentiator. It has been a driver of success in the past and forms the foundation for Sanlam’s sustainable performance over the long term. We continue to consistently outperform our RoGEV hurdle rate.
Top-line growth is a focus area as fund flows, fee income and investment returns are under pressure due to a persistent challenging operating environment.
Sanlam has differentiated itself from many global peers since listing in 1998 by emphasising the profitability of new business and not driving increased market share at any cost. This meant that at times, when competitors priced too aggressively, we decided to rather forsake some market share over the short term than adding unprofitable business to our base. This aligns with Sanlam’s capital management approach of setting minimum hurdle rates for the Group clusters and linking these hurdles to remuneration arrangements. This ensures that clusters manage the internal rate of return of new business similar to any capital deployment decision.
Therefore, Sanlam’s new business margin has improved from being one of the lowest in the market 15 years ago to be at the higher end of our peer group.
Client-centricity is at the core of our ability to grow top-line in a profitable manner. We meet our clients’ needs and expectations for wealth creation, management and protection through appropriately priced solutions. These are supported by a strong and trusted brand and exceptional service delivery. We are thus able to maintain and grow our market share of profitable new business while improving the retention of our existing client base.
Sanlam’s approach to client-centricity is driven by the following fairness outcomes:
The Sanlam Customer Interest committee is mandated by the Board to review and monitor that all customer-related decisions adhere to these fairness outcomes. The committee tracks, for example, indicators relating to:
This strategic pillar is one of the main contributors to shared value creation for Sanlam stakeholders:
Our objective is to enhance Sanlam’s international positioning and grow the relative importance and contribution of the international business to the Group, with a specific Pan-African focus.
Enhancing Sanlam’s resilience has a positive outcome for clients, shareholders and the communities where we operate. It enhances the stability of our overall solvency, enabling us to protect our clients against the potential negative financial consequences of unexpected events through a range of insurance solutions and investment options. Our continued ability to pay claims enhances resilience for clients and their communities.
Diversification across geographies and lines of business enables us to manage the earnings and currency volatility that can emanate from the countries in which we operate. This provides more stability in overall earnings generation and dividend payment capability to our shareholders. Diversification through SEM is into higher-growth regions that enhance future earnings growth potential. This supports the main attraction of the Sanlam investment case: stable real dividend growth combined with accelerated future growth prospects.
Given our diversified business profile, the challenge for Sanlam is to maintain operational controls and governance oversight. The Sanlam Group Business Philosophy defines how the Group acts and behaves as ‘one firm’. It applies to all Sanlam clusters and subsidiaries and includes a summary of Sanlam’s culture, values and responsibilities, thereby encapsulating the way in which it does business and allocates resources.
Our geographic diversification is depicted per cluster and per business line.
To attract and retain clients, Sanlam provides innovative financial solutions that are testimony to the diversity of our people and their creative thinking.
We execute on this pillar by enhancing and adapting financial solutions along the full extent of the wealth creation, management and protection value chain. We consider the full life cycle of our clients and the systems on which they rely for their personal or business protection and prosperity.
To develop these solutions, we invest in and value diversity in our employees, particularly for their contribution to innovative thinking. We invest in their training and development and focus on upskilling employees where digital solutions reduce the need for human intervention.
We focus on innovation across our products and services, distribution channels and back office processes to enhance Sanlam’s attractiveness in the market and to ensure efficiency across the Sanlam business model. Digital innovation is a key focus area. Our approach is threefold:
The Sanlam design studio was established in the SPF cluster to provide a working and accelerator space for cross-functional teams in Sanlam to achieve the following:
Recent Sanlam digital and technology-based offerings include:
Sanlam has a track record of delivering operational efficiencies. This is evident in our ability to largely maintain new business margins on a per-product level, despite cost and fee pressures, as well as negligible expense experience variances recognised in life insurance RoGEV over the last 10 years. Operational efficiencies are about cost management and creating the ability to more effectively service the changing needs of clients, from a product and engagement perspective. As such, it is a core mechanism to ensure client satisfaction and persistency, which enhances top-line growth.
We are optimising operating and cost efficiencies through:
We aim to enhance capital efficiency on an ongoing basis by ensuring appropriate levels of capital allocation to our businesses and redeploying discretionary capital for investment in future growth opportunities. This optimises RoGEV over the long term.
Our capital base is a primary safeguard to our clients and regulators that we will remain solvent to honour our value creation commitments. Therefore, Sanlam has to be proactive in understanding and managing the risks it is exposed to and managing the trade-off between the level of capital held by the Group and clients’ and regulators’ trust in our future solvency.
The Group Estate committee, an internal management committee, is responsible for reviewing and overseeing the management of the Group’s shareholder capital base in terms of the specific strategies approved by the Board. By their nature, the life and general insurance operations require the largest levels of allocated capital.
We manage capital allocation at the efficient frontier by balancing:
We have a dual focus in how we allocate capital: ensuring stable dividend growth while providing appropriate investment for future growth.
Any capital in excess of requirements is allocated to the discretionary capital portfolio in pursuit of structural growth initiatives.
The Group is well capitalised and has solvency cover ratios in excess of the upper end of the target range. Read more about capital management in the Financial Review.
Our priority is to use available discretionary capital for investment opportunities that will enhance RoGEV and overall earnings growth. If discretionary capital cannot be used for investment in the foreseeable future, it is returned to shareholders through:
No share buy-backs or special dividends are currently under consideration. Investments in the short to medium term will be focused on: