We have a partnership model to enable efficient value creation and transformation. South Africa still dominates in terms of profit contribution, but we are gaining market share in Africa following the acquisition of Saham Finances. The net result from financial services contribution from the Rest of Africa is expected to grow considerably in the next five years.
In South Africa our preferred model is to have wholly owned subsidiaries except where a partner can offer a complementary capability – then we take a smaller stake in the business or venture. Examples include BrightRock and EasyEquities.
In Africa our preferred model is majority ownership but with a meaningful shareholding by our in-country partner. We are prepared to take minority stakes where necessary to execute on our growth strategy.
In the UK we have mostly wholly owned operations but will consider partners to scale the
Our partnership model provides us with a competitive advantage:
Sanlam has a unique Pan-African footprint following the conclusion of the final phase of the Saham Finances acquisition. Extracting the synergies embedded in the acquisition is a key priority, in particular using the combined footprint to provide holistic, ‘one-stop’ financial solutions to multinational companies operating across the African continent, wrapped around the local retail and institutional offering. This will be a compelling offering to improve ease of doing business not only for the multinational companies operating in Africa, but also for international insurance brokers and developed market insurers that need to provide their client base with insurance and employee benefits solutions in Africa.
Our primary performance target for measuring shareholder value creation is Return on Group Equity Value (RoGEV), which reflects our success in growing the value of Sanlam’s operations over the long term. Group Equity Value (GEV) provides an indication of the value of Sanlam’s operations and is therefore a forward-looking metric. It includes: the value of Sanlam’s in-force book of life insurance business, the value of non-life operations based on longer term assumptions and the fair value of discretionary and other capital not allocated to our operations. It does not represent an appraisal value of the Group as it does not place a value on future new life insurance business.
RoGEV is a more appropriate performance measure (compared to traditional return on capital and earnings metrics) for a business such as Sanlam where earnings from a particular client solution emerges over a number of years. It combines current year earnings compared to expectations (short term performance) and changes in future expected earnings (long term performance) in a single performance metric. RoGEV measured over time not only reflects shareholder value creation but also indirectly our success in creating value for all other material stakeholders due to the direct relationship between shareholder earnings and value creation for other stakeholders over the long term. This makes RoGEV a robust composite value measure for a diversified group such as Sanlam.
RoGEV measured against a minimum performance hurdle is the primary quantitative performance benchmark in evaluating the success of our strategic execution.
Read more about RoGEV performance in the Financial Review.
The intended outcome of our stakeholder value creation is to create financially resilient and prosperous individuals, organisations and societies. We measure our performance through a number of indicators per material stakeholder group that reflects our contribution to their financial resilience and prosperity.
Read more about our performance in 2018 per stakeholder group.
We create competitive advantage by:
Sanlam is an emerging market player with a unique footprint, spanning countries with high economic growth potential and low financial services penetration outside of South Africa, our home market.
This provides us with a leveraged future growth opportunity as we are well positioned to meet the demands for financial solutions that follow when demographic profiles change and aspirational lifestyles develop due to economic growth, urbanisation and young people entering the formal economy.
Our material stakeholder groups are shareholders, clients, employees, business partners, governments, regulators and the broader society in which Sanlam operates. Our business philosophy is built on optimising value creation for our material stakeholders. This includes understanding and managing the sometimes conflicting expectations and trade-offs between the various stakeholders through active engagement and stakeholder participation.