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Skip Navigation Linksstrategic-pillars Understanding the Four Strategic Pillars

Understanding the Four Strategic Pillars

In this section we unpack the four strategic pillars in more detail. The Group Chief Executive’s Strategic Review provides commentary on performance in terms of the four strategic pillars in 2018.

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:

  1. Clients are confident that they are dealing with a Group where the fair treatment of clients is central to our culture and values.
  2. Products and services marketed and sold are designed to meet the needs of the identified client groups and are targeted accordingly.
  3. Clients are given clear information and are kept appropriately informed before, during and after the time of contracting.
  4. Where clients receive advice, the advice is suitable and takes account of their circumstances.
  5. Clients are provided with products that perform as the Group has led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect.
  6. Clients do not face unreasonable post-sale barriers to change a product, switch providers, submit a claim or make a complaint.

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:

  • Product design
  • Information provided
  • Advice
  • Product performance
  • Service
  • Claims
  • Complaints handling
  • Product accessibility

This strategic pillar is one of the main contributors to shared value creation for Sanlam stakeholders:

  • Sanlam’s profitability is enhanced to the benefit of shareholders.
  • Advisers and other distribution partners benefit from upfront and recurring commission and advice fees earned from new business written.
  • Additional employment and career opportunities are created as the size of Sanlam’s business grows.
  • The wealth creation, management and protection benefits we provide to clients underpin their financial resilience and prosperity in the long term.
  • A more profitable and successful Sanlam is better able to contribute to a resilient and prosperous society where we operate.

Pillar Connections and Dependencies

Key Strategic Risks Associated with this Pillar

  • Poor economic growth
  • Disruptive threats/Fourth Industrial Revolution
  • Transformation and diversity
  • Political and social instability
  • Severe weather/climate change

Key Long-term Measurements of Progress and Execution

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.

Pillar Connections and Dependencies

Key Strategic Risks Associated with this Pillar

  • Poor economic growth
  • Diversified growth initiatives
  • Disruptive threats/Fourth Industrial Revolution
  • Human resource scarcity and stretched resources
  • Simultaneous regulatory implementation
  • Implementation of the Group’s Pan-African strategy
  • Transformation and diversity
  • Cyber-risk
  • Political and social instability
  • Severe weather/climate change

Key Long-term Measurements of Progress and Execution

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:

  1. Digital offerings and technology-enabled product solutions as part of the omni-channel distribution approach
  2. Implementing a Group-wide business intelligence platform to assist product development, underwriting, client service and cost efficiencies through big data and enhanced data analytics
  3. Investigating opportunities to enhance operational efficiencies through robotics

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:

  • Rapid prototype development
  • Leverage current success stories
  • Provide training through the accredited Sanlam Design Thinking course
  • Expand the in-house fintech ability

Recent Sanlam digital and technology-based offerings include:

  • Sanlam digital storefront – a comprehensive suite of financial products with online fulfilment capability
  • Robo-advice – self-directed, simplified and automated unit trust investment platform
  • Indie – internal startup focused on future products with customised partner and territory requirements
  • On demand – GoCover app with on-demand finserv platform featuring accidental injury and death cover
  • Acquisition of stake in EasyEquities, an innovative low-cost investment platform
  • Acquisition of a majority stake in BrightRock, enhancing our product offering with a unique, needs-matched life risk product solution
  • Virtual advice platform – online service allowing users to screen, select, book and pay an adviser for needs-specific advice
  • Paperless application submission of SPF’s life new business

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:

  • investments in distribution and administration systems and processes;
  • automation;
  • restructuring to enhance focus;
  • system integration; and
  • implementation of business intelligence and data analytics solutions.

Pillar Connections and Dependencies

Key Strategic Risks Associated with this Pillar

  • Disruptive threats/Fourth Industrial Revolution
  • Cyber-risk
  • Human resource scarcity and stretched resources
  • Transformation and diversity

Key Long-term Measurements of Progress and Execution

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:

  • the level of capital required to meet target solvency cover ratios over the long term (the higher the target solvency cover ratios, the higher the amount of capital held);
  • the strategic asset allocation of the allocated capital (the more conservative the portfolio is invested, the lower the amount of capital held); and
  • expected net investment return to be earned on the allocated capital (the more conservative the portfolio is invested, the lower the expected investment return will be)
  • to optimise RoGEV over the long term.

We have a dual focus in how we allocate capital: ensuring stable dividend growth while providing appropriate investment for future growth.

We are prudent: we only use free cash flow to fund dividends. Our dividend philosophy is embedded in our capital management approach – we therefore do not manage our capital and solvency through our dividend policy. We maintain a cash dividend cover ratio of between 1,0 and 1,2 times to manage smooth real dividend growth of 2% – 4% per annum


Sources of cash earnings


Net result from financial services


Strong cash generation in mature markets support real dividend growth, allowing SEM to reinvest for growth

Cash earnings generated by operations available to fund Sanlam dividend


Any excess dividend cover is added to the discretionary capital portfolio


Discretionary capital redeployed for structural growth or returned to shareholders


Investment return on capital


Capital not allowed for in dividend cash flows


Allocated capital for SA life operations assumes that investment return will be free cash flow under normal conditions

Funding for increased capital requirements and to maintain targeted solvency levels


Any excess investment return is added to the discretionary capital portfolio


Discretionary capital redeployed for structural growth or returned to shareholders

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.

What Shareholders Need to Know about Dividends

  • Investment return on capital is not considered when determining dividend cash flows.
  • Our dividend is thus not impacted by short-term volatility caused by the net investment return component of earnings.
  • Potential volatility in net investment return is taken into account in setting our required capital levels. We can withstand severe investment market volatility and remain within our target solvency range.

Responsible Use of Discretionary Capital

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:

  • Share buy-backs as a preference. We use GEV per share as an approximate ceiling for buy-backs – not as an indicator of the value of a Sanlam share, but because buying Sanlam shares at this level will be undisputedly value-accretive to shareholders.
  • Special dividends if share buy-backs are not feasible.

No share buy-backs or special dividends are currently under consideration. Investments in the short to medium term will be focused on:

  • Increasing our shareholding in current SEM operations where possible and within our partnership model
  • Consolidation opportunities in fragmented markets in Africa
  • Adding Egypt and Ethiopia to the footprint at an appropriate time. Egypt will likely be pursued through Saham Finances. Ethiopia is dependent on changes to the country’s foreign direct investment regulations.
  • Expanding and improving line of business exposure in the Rest of Africa
  • Niche opportunities in South Africa and the United Kingdom

Pillar Connections and Dependencies

Key Strategic Risks Associated with this Pillar

  • Poor economic growth
  • Simultaneous regulatory implementation
  • Diversified growth initiatives
  • Implementation of the Group’s Pan-African strategy
  • Political and social instability
  • Severe weather/climate change

Key Long-term Measurements of Progress and Execution

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