A snapshot of Sanlam 01 Creating a world worth living in We have been creating value for stakeholders since 1918 – for almost 100 years.
Our world has changed beyond recognition over In this report, we explain our insights and strategic this time. The pace of development is increasing response to remain true to our purpose. These define exponentially, creating opportunities, presenting and recognise the need for Sanlam to contribute to challenges and opening ways to improve future financial resilience and prosperity in all the markets prospects for all. At Sanlam, the essence of our purpose where we are present. Resilience generally describes has not changed: to build a world of Wealthsmiths™, the capacity of a system, be it an individual, an supporting people in living their best possible lives organisation, the environment or an economy, to through financial resilience and prosperity at the absorb internal and external shocks, and deal with individual, organisational and societal levels. change while continuing to flourish. At Sanlam, resilience is about protecting our stakeholders against Sanlam is one of the biggest internationally active the potential negative financial consequences of insurance groups globally, and is classified as a these events. We create financial prosperity through domestic systemically important financial institution in enhancing people’s ability to maintain financial South Africa. As one of the largest financial services independence beyond their income-generating groups in Africa, we are a key pillar of the continent’s capability. The focus areas and outcomes that ensure infrastructure – and any material instance of failure or the sustainability of Sanlam’s contribution to financial impairment of Sanlam would have a significant impact resilience and prosperity are set out in detail in the on the economies in which we operate. Resilience Report, which is supplementary to our We therefore take our role and contribution to a Integrated Report. stable financial system seriously and are committed to This report reflects on our journey in 2017 by describing supporting financial resilience, well-being, prosperity how we enabled financial resilience and prosperity for and inclusion. We achieve this in a sustainable manner individuals, organisations and society, while looking by creating shared value for our stakeholders. forward to the next 100 years. The profile, impact and influence of our different stakeholder groups transformed over the ten decades in line with the changing world. They require new responses to changing economic, social and political environments. Over time, the needs and value perceptions of stakeholders have also changed, with Sanlam often in a position where our strategic decisions have to balance different stakeholder groups’ interests.
INTEGRATED REPORT 2017 1 A snapshot of Sanlam Why invest in Sanlam
WE OUTPERFORMED OUR ROGEV TARGET – SANLAM HAS BEEN CREATING VALUE which measures the value created for shareholders – consistently and contributing to financial since listing in 1998. resilience and prosperity for almost 100 years – for all our stakeholders. WE INCREASE OUR DIVIDEND in real terms through a stable dividend policy.
Our strategic objectives OUR DIVERSIFIED NATURE remain relevant and CREATES RESILIENCE CONTINUE TO CREATE VALUE while offering growth OVER THE SHORT, MEDIUM opportunities grounded in our AND LONG TERM. culture of client-centricity.
WE HAVE A SKILLED AND EXPERIENCED MANAGEMENT TEAM with appropriate incentives to drive high performance. OUR LARGE, STABLE SOUTH AFRICAN BASE AND MATURE BOOK ALLOW US TO INVEST OUR OMNI-CHANNEL DISTRIBUTION APPROACH in other high-growth, but more CREATES SEAMLESS volatile, territories through INTERACTION AND a partnership model. COMPREHENSIVE SUPPORT to enhance the personal WE HAVE A FIRST-MOVER intermediary model with ADVANTAGE a strong direct sales capability. in the Rest of Africa and an unmatched Pan-African presence.
2 SANLAM A snapshot of Sanlam 01 Feedback from the users of our report
Sanlam has more than 450 000 shareholders, who constitute one of our material stakeholder groups. In addition to our engagement through results presentations and general meetings, the annual reporting suite is one of our main channels of communication to our shareholder base, and also to sell-side investment analysts.
Our reporting philosophy is founded on providing our shareholders and the broader investment community with relevant, transparent and value-adding information to enhance the investment analysis process. We again elicited feedback from our largest shareholders and sell-side analysts this year to determine their satisfaction with the quality and materiality of information provided in this report.
Feedback insights Sanlam’s response The full annual reporting suite is the most preferred The five sustainability chapters of 2016 were refocused source of information when assessing performance, following a materiality process to provide more succinct with the sustainability report a secondary source of and relevant reporting to our stakeholders. The Resilience performance assessments. Report links our sustainability clearly to our purpose, and identifies the indicators that would alert readers to progress, challenges and opportunities in this regard. The financial review, Group Chief Executive’s strategic We included the 2017 performance reports in a clearly review and the Operational review by the Group identified section in this report, with the more static Chief Executive are the top ranking sections according information presented in separate sections. The shareholder to the order in which the report is read. value drivers have also been included in the Sanlam Snapshot in the Integrated Report, rather than an appendix – based on the feedback and ranking. The content of the Integrated Report covers the More detailed commentary has been included in the aspects that our shareholders deemed necessary, Financial and Operational Review and additional information with additional detail to be considered for the on the SEM operations have been included in the Shareholder international operations (Saham Finances, Shriram Information section. The annual reporting suite elements Capital, other SEM operations) and human resources. are explained visually to guide readers on where to find information that is not specifically included in the Integrated Report. We asked shareholders how much importance they The assurance process is explained in more detail on page 146 attached to external assurance of the content of the and further assurance of material non-financial elements will Integrated Report. 84% regarded external assurance be considered. as important to very important. Shareholders indicated a high level of understanding We continue refining our reporting content in line with the of the company’s strategy and long-term objectives, requirements of the
INTEGRATED REPORT 2017 3 Financial highlights 2017
Net result from financial RoGEV per share Dividend per share services 14,8% Adjusted RoGEV R8 549m 290 cents +7,3% +8,2% of 15,8%
Calendar of 2017 events
January February March
Independent non-executive director, Just over 2 000 swimmers took Clement Booth resigned as a Paul Bradshaw, passed away on part in the third Sanlam Cape Mile at non-executive director from the boards 12 January. the Eikenhof Dam near Grabouw, of Sanlam Limited and Sanlam Life South Africa, promoting a healthy Insurance Limited, effective 8 March. Through the Sanlam Foundation, Sanlam lifestyle. partnered with the Tertiary School Sanlam’s 2016 annual results announced of Business Administration to recruit Sanlam launches the GoCover app, an to the market. employees as mentors to first- or second- innovative on-demand insurance offering. The Sanlam Cape Town Marathon year students. awarded Gold Label Status, making it Sanlam portfolio managers bring Africa’s only International Association home accolades for being the top of Athletics Federation (IAAF) Gold performers in their fund categories Label Road Race. at the 21st Raging Bull Awards. Sanlam launches Family Budget Week, aimed at inspiring more South Africans to draw up a family budget.
April May June
Temba Mvusi, the Chief Executive All conditions precedent for the Jurie Strydom, the joint deputy CEO of Group Market Development, was acquisition of a further 16,6% in of SPF, was appointed as CEO of SPF appointed as acting Chief Executive Saham Finances were fulfilled and the effective 1 June. Officer (CEO) of the Sanlam Corporate transaction became effective 10 May. The 19th annual general meeting of cluster, effective 1 April. Sanlam Emerging Markets (SEM) wins the shareholders of Sanlam was held on Paul Hanratty was appointed as an Insurance Company of the Year award at 7 June, with all resolutions passed. independent non-executive director to the third annual Africa Re awards. Johan van Zyl succeeded Desmond Smith the boards of Sanlam Limited and Sanlam who retired as chairman from the boards Hubert Brody, CEO of Sanlam Personal Life Insurance Limited, as well as to the of Sanlam Limited and Sanlam Life Finance (SPF), stepped down on 31 May. Audit, Actuarial and Finance, and Risk Insurance Limited, effective 8 June. and Compliance committees, effective SEM acquired a majority stake in 3 April. PineBridge Investments East Africa Consumers again rate Santam the best Limited in Kenya, the largest asset at meeting and exceeding their insurance manager in East Africa. needs, the South African Customer Sanlam launched its groundbreaking Satisfaction Index (SAcsi) shows. drama series, Uk’shona Kwelanga, which combined soap opera and social media in South Africa’s first-ever WhatsApp drama series.
4 SANLAM A snapshot of Sanlam 01
Net value of new New business volumes Net VNB margin covered business (VNB)
R230bn R1 841m 2,94% -1,3% +14,7% +25bps
July August September
SEM disposed of its stakes in Enterprise Sanlam won 10 awards at the annual Sanlam Life Insurance Limited acquired Life Assurance Company Limited, prestigious Loerie Awards for branding a 53% stake in life insurance provider, Enterprise Trustees Limited and and advertising excellence. BrightRock, effective 1 September. Enterprise Insurance Company Limited in Sanlam was recognised as the 2017 Sanlam’s 2017 interim results announced Ghana, effective 1 July. South African New Product Innovation to the market. Sanlam launched the Mna Nam campaign Leader in the insurance industry on Flip Rademeyer retired as a non-executive in support of National Savings Month. digital transformation by the consulting director from the boards of Sanlam The Mna Nam is a limited edition bracelet and research firm Frost & Sullivan. Limited and Sanlam Life Insurance with an embedded QR code that links to Limited, effective 6 September. a savings wallet on the wearer’s mobile phone – a first of its kind globally. The board of the Association for Savings and Investment South Africa (ASISA) appointed Sanlam Group CEO Ian Kirk as its new Chairman.
October November December
Sanlam was once again awarded the Top Sanlam Investments acquired a 30% stake Sanlam announces a solid operational Employers South Africa certification. in EasyEquities, an innovative investment performance in its operational update platform, effective 17 November. for the 10 months to 31 December 2017. Sanlam and CANSA celebrated 25 years of teaming up against cancer at the Sanlam Cancer Challenge (SCC) national golf finals at the Gary Player Country Club at Sun City. A record-breaking R4,25 million was raised.
INTEGRATED REPORT 2017 5 Our purpose
Understanding our strategy
Our vision is to: Our purpose is to build a world of Wealthsmiths™, supporting Lead in client-centric people in living their best possible wealth creation, Our purpose lives through financial resilience management and and prosperity at individual, protection in organisational and South Africa; Our vision societal levels. Be a leading Pan-African financial services group with a meaningful presence in India and Our Malaysia; and strategic intent Play a niche role in Our strategic intent is to wealth and investment create sustainable value management in specific for all stakeholders. developed markets. Our strategic pillars
Sanlam’s vision and strategic intent is pursued through a strategy focused on four pillars:
Profitable top-line growth through Extracting value through innovation a culture of client-centricity and improved efficiencies
Enhancing Sanlam’s resilience and Responsible capital allocation earnings growth through diversification and management
Continuous transformation is central to Sanlam’s ability to adapt to a changing world and underpins all of the strategic pillars.
Read more about our long-term strategic execution through the pillars from page 102.
RoGEV – our primary quantitative performance measure Our primary performance target for measuring shareholder value creation is Return on Group Equity Value (RoGEV), which measures the outcome of a combination of value drivers. These value drivers are directly related to our material stakeholders, and the optimisation of RoGEV is therefore reflective of optimal value creation for all stakeholders. This makes RoGEV a robust composite value measure for a diversified group such as Sanlam. RoGEV measured against a minimum performance hurdle is our primary quantitative performance benchmark in evaluating the success of our strategy to maximise shareholder value. Group Equity Value (GEV) provides an indication of the value of Sanlam’s operations. 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. GEV does not allow for future new life insurance business, only new business written within a particular year contribute to RoGEV.
6 SANLAM Our purpose
A snapshot of Sanlam 01
Our key opportunity Our three stakeholder groups encapsulate As an emerging market player, we are positioned to meet our material the growing demands that follow when demographic stakeholders, being: profiles change due to economic growth, urbanisation, shareholders, young people entering the formal economy, and aspirational clients, employees, lifestyles developing. This change expands market segments advisors, independent and increases wealth – with the concomitant demand distribution partners, for financial advice, planning, investment management regulators and the and protection. As we meet these demands through our broader society products and services, we expand our client base, thereby in which Sanlam contributing to higher levels of collective financial resilience operates. and prosperity in society. We have a unique footprint, spanning countries with high economic growth potential and low financial services penetration – a leveraged opportunity for growth at Sanlam.
ry environ ulato me In South Africa, our strategy is about retaining eg nt R
In te our leadership position in financial services r n a t ividua l t n d ls o In p n e and putting distance between us and our e e m r n a m o t r i n i n competitors. o v g r i n e v e
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Financial resilience and prosperity – our primary qualitative performance measures The intended outcome of Sanlam’s stakeholder value creation is to create financially resilient and prosperous individuals, organisations and societies. Resilience is the capacity of a system – be it an individual, organisation or an economy – to deal with change and continue to develop, and its ability to use shocks and disturbances, such as a financial crisis or climate change, to spur renewal and innovative thinking. Resilience thinking at Sanlam is about generating increased knowledge about how we can strengthen the financial resilience and prosperity of individuals, organisations and society to the mutual benefit of all our material stakeholders.
INTEGRATED REPORT 2017 7 Understanding our business
Sanlam is a diversified financial services group, headquartered in South Africa, operating across a number of selected global markets. We use a decentralised operational model, managed through tight principles set at a Group level, to execute on our strategy. This model is a key part of our ability to differentiate ourselves from our peers in strategic execution. We offer the following products and services:
Life insurance Credit and structuring
Risk solutions provide monetary benefits to Retail client solutions offer access to personal compensate for the financial impact of unexpected loans and traditional banking to create long-term events such as death, disability, trauma and financial prosperity retrenchment Institutional client solutions provide asset-based Investment solutions facilitate wealth accumulation financing, debt origination and structuring, asset- and provide for income at retirement through a liability management, equity and interest rate full range of investment options that offer varying derivatives, and collateralised lending in support levels of investment guarantees of business activity and economic growth
General insurance Administration, health and other
Insurance solutions provide monetary benefit to Long-term financial resilience and prosperity is compensate for the loss of physical property, loss created through individual and organisational of trading income or liability incurred. It includes financial needs analysis and advice (including estate motor, property, aviation, crop, engineering, planning, trusts, wills), health management and guarantee, liability, accident, transportation and retirement fund administration alternative risk transfer insurance
Sanlam’s financial and risk
Investment management solutions support wealth creation and protection for Retail client solutions offer savings options that individuals and organisational create wealth through a range of collective clients. The nature of these investment schemes and wealth management solutions, including stockbroking solutions often have a Institutional client solutions offer wealth positive impact beyond the creation through traditional and specialist asset client, as it supports systemic management in South Africa and abroad resilience for businesses, families and communities, such as in the case of death, disability or fires and floods.
8 SANLAM A snapshot of Sanlam 01
We offer these products and services through businesses managed in five clusters:
Sanlam Sanlam Sanlam Sanlam Personal Finance Emerging Markets Investments Santam Corporate
To succeed in achieving Sanlam’s vision, we developed a unique set of competitive Employ some of the best and advantages that enable us An unmatched footprint with most experienced skilled people to effectively execute scale and presence in 45 developed in the industry our strategy and emerging markets
Competitive and diversified Strong and trusted brand financial solutions
Track record of responsible and Presence in all forms of efficient capital allocation distribution channels
Sanlam depends on the following key resources to create sustainable shared value: A strong capital base to ensure our solvency over the long term
In te r n A sustainable environment in support of a healthy and prosperous society a t ividua l t n d ls o In p n e e
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x s S The external operating environment has a significant E P t o n lit e ic impact on our ability to create value for our stakeholders. a nm l e ro n vi vir en This environment was marked by major change onm ial ent Soc in recent years, which we continue to monitor, evaluate and respond to as appropriate.
INTEGRATED REPORT 2017 9 Understanding our business (continued)
We deliver client-centric products and services through the following five primary operational activities:
Product development Business support
Develop innovative wealth creation, management Provide business support services including financial and protection products and services, including management, accounting, actuarial valuations, appropriate distribution channels regulatory reporting, human resources and and branding information technology
Distribution and client support Capital and risk management
Manage our various distribution channels Deploy discretionary capital Provide client support services, including Optimally allocate financial capital to clusters administration, actuarial, human resources and Financial and actuarial risk management information technology Regulatory compliance
Product management
Investment management of client and shareholder funds Asset-liability matching in line with clients’ needs and preferences Sanlam provides financial Conduct experience analyses to identify emerging solutions to individuals and trends as input to product pricing and claims management organisations through a network of channels and Governance of participating products partnerships in 45 countries.
The key trade-offs that we manage for sustainable shared value creation:
How profitable products are vs what is appropriate The level of investment of shareholder profit in for our client transformation initiatives
Considering the potential impact of responsible Balancing profitability against investment in investment practices on the investment return our employees we generate for our clients
Weighing the cost of investment in innovation Optimising the level of shareholder capital to retain against long-term efficiencies while ensuring our sustained solvency
10 SANLAM A snapshot of Sanlam 01
We follow an omni-channel distribution approach to ensure that clients are reached and serviced through their preferred channel. The distribution model is continually adapted to changing client preferences, with increased focus being placed on further developing Sanlam’s digital capability. Sanlam’s current distribution channels are broadly classified into four categories:
Advisors
Advisors service our retail clients via two categories: those who are only accredited to sell Sanlam products, and those accredited to sell a wider product range. Where an advisor is accredited to sell a wider product range, limits apply to the proportion of business that can be placed at competitors. Advisor channels are typically managed according to market segment (lower income/entry-level, middle income, affluent and professional/small business). This ensures appropriate focus on the specific needs of the various segments in line with our client-centric business philosophy.
Independent brokers
Brokers service retail and institutional clients across market segments and are supported by dedicated broker support units. Brokers are an important distribution channel, especially in the South African affluent market, where the majority of new business is written through brokers, and in the Rest of Africa, where most institutional general insurance business is placed by brokers. Given their independence to distribute all competitor products, establishing and maintaining superior support and relationships with this channel are key focus areas of the broker support units.
Direct
Direct units distribute Sanlam products directly to retail and institutional clients using technology-based channels such as outbound call centres, online platforms and mobile communication. Direct distribution contributes a major portion of Santam’s general insurance premiums through MiWay, but the contribution to life and investment business volumes is still relatively small. However, this is expected to change over time as the use of technology to buy financial services becomes more prevalent. The development of our digital capability as part of the omni- channel approach is therefore receiving particular emphasis.
Affinity groups, bancassurance and telecommunications partners
Affinity groups focus on distribution through groupings of retail clients, for example, employer and church groups. The affinity group partner is typically responsible for administration at an individual member level, and Sanlam provides the relevant products. Sanlam has relationships with a number of banks and telecommunications companies across Africa through which we distribute insurance and investment products to their client bases. Affinity groups, bancassurance and telecommunications relationships offer us access to large client bases through single entry points. This is a key benefit for start-up operations to gain economies of scale significantly faster than through traditional retail intermediaries. It also forms a critical part of our omni-channel distribution approach and promotes financial access in under-serviced low income segments due to the lower distribution cost.
INTEGRATED REPORT 2017 11 Understanding how our business creates shared value
The cornerstone of our purpose, to build ividua Ind ls a world of WealthsmithsTM, is our ability to create shared value for our material
O stakeholders. In this way we are able r g
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Read more about shared value in the online Resilience Report.
Creating a world worth living in means that organisations have the benefit of: Wealth creation, management and protection through sound advice, fair ividua Ind ls treatment and a range of financial solutions that meet collective needs and expectations
Opportunities to generate fee income as distribution partners of Sanlam
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n i y Growth in dividends and the value of institutional shareholding in Sanlam s t a t ie i c o o ns S Access to financial capital for businesses in support of sustainable economic growth through Sanlam’s investment of client and shareholder funds under management
Technical and financial support to regulators to enable economic, social, regulatory, political and environmental resilience and prosperity
Creating a world worth living in means that society has the benefit of: Economic empowerment and choice through consumer financial ividua Ind ls education and entrepreneurship support
Enhanced levels of education and skills development at primary, secondary and tertiary levels
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n i y s t environment-related risk management and transformation initiatives a t ie i c o o ns S Stability and liquidity in the financial sector through Sanlam’s investment of client and shareholder funds under management
Trust in the financial sector as a result of technical and financial support to regulators Collaboration and trust between business, government and labour in support of inclusive economic growth
12 SANLAM A snapshot of Sanlam 01
Creating a world worth living in means that ividua Ind ls individuals have the benefit of: Wealth creation, management and protection through sound advice, fair treatment and a range of financial solutions that meet individual
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n i y Employment opportunities and fair remuneration that leads to career s t a t ie i c development and financial security o o ns S Growth in dividends and the value of Sanlam shares owned by our individual shareholders
Creating a world worth living in creates shared value for Sanlam as we benefit from:
Sustainable economic growth and an expanding client base
The uptake of products and services which generates income from margins and fees
Investment return earned on financial capital provided by Sanlam’s individual and institutional shareholders
Access to an increasing pool of specialised skills required by our business model
Financial stability through healthy, resilient and prosperous societies in the markets where we operate
Consumer confidence and trust which leads to systemic financial stability
INTEGRATED REPORT 2017 13 Our key quantitative performance measure: RoGEV
RoGEV is a robust financial performance indicator that measures the value we add for our shareholders and reflects how successful we are in creating value for our material stakeholders.
GEV is the aggregate of: with allowance for the cost of capital allocated to these businesses (76,6% of GEV The value of Sanlam’s in-force book of life insurance at 31 December 2017). business; Some small and/or newly acquired businesses The value of our non-life operations based on longer are valued at net asset value (2% of GEV at term assumptions; and 31 December 2017). The fair value of discretionary and other capital not Discretionary and other capital not allocated to allocated to Sanlam operations. Group operations is valued at fair value (6,5% of The following valuation methodologies are applied: GEV at 31 December 2017). Our stake in Santam is valued at its listed RoGEV is equal to: market value, which represents the market’s The change in GEV, after adding back dividends valuation of Santam’s future profits (14,9% of GEV paid and movements in share capital, as a at 31 December 2017). percentage of GEV at the beginning of the year. 94% of our other non-life operations and the RoGEV is therefore a measure of growth in the in-force book of life insurance business is valued value of Sanlam, excluding future new life insurance at the present/discounted value of future profits business and any allowance for prudence in our (net result financial services and net investment valuation assumptions for Group operations. return) we expect to earn from these operations,
Our future profit and RoGEV drivers
Income is driven by: Insurance The size of our client base: New Fees margins business and retention of existing Net clients are the key drivers of the Insurance result from Other income size of our client base. claims financial services Growth in the underlying asset Acquisition and base managed and administered on administration behalf of clients: Investment market cost returns and our relative investment Future performance are key drivers of the profits underlying asset base. The level of fees and margins priced into our products and services. Investment Net Investment Insurance claims relate to the life performance investment market relative to insurance risk underwriting and returns return on market returns capital general insurance claims that we pay to clients to protect them from unforeseen events. Acquisition and administration cost relates to the expenses incurred in acquiring new business and running our operating activities.
14 SANLAM A snapshot of Sanlam 01
Sanlam’s RoGEV target is to outperform its
cost of capital of i+4%, with i being the South African nine-year risk- free rate. We have outperformed this hurdle on a cumulative basis
since listing in 1998.
- Read more about our RoGEV performance in 2017 in the financial and operational review from page 70. Target Actual
The key strategic focus areas to manage our RoGEV value drivers
To improve RoGEV and achieve our hurdle rates, Sanlam How do we manage the insurance claims has to identify and drive the inter-connected factors experience? which are captured in the following strategic questions: How do we reduce our acquisition and How do we increase new business volumes? administration costs? How do we retain existing clients? How do we improve our investment performance? How do we optimise the fees and margins we earn How do we manage the amount of capital held? from our products and services?
Focus on client-centricity to build trust in brand
Expand distribution footprint in all regions in which we operate
How do Introduce new distribution channels we increase new business volumes? Product innovation to enhance competitiveness
Structural changes to enhance agility and responsiveness to changing client needs
Expand through acquisitions
INTEGRATED REPORT 2017 15 Our key quantitative performance measure: RoGEV (continued)
Client-centricity – only selling products and services that a client needs at an appropriate price
Manage value outcomes of products and services in line with client expectations
Focus on quality of business – affordability and other measures used as part How do we of the sales process retain existing clients? Remunerate distribution channels based on actual retention experience
Continuously measure client engagement and satisfaction
Product innovations to improve value proposition of client product portfolio
Appropriate and competitive pricing
Optimising business mix How do we optimise the fees and margins we earn Expand into under-penetrated regions that offer higher margins from our products and services? Product innovation to reduce complexity and maintenance cost
Optimising capital requirements
Appropriate pricing of new business
Limit exposure through product diversification
How do we manage the Use reinsurance to limit exposure insurance claims experience? Regular claims experience analyses to identify trends
Risk management to prevent fraudulent claims
16 SANLAM A snapshot of Sanlam 01
How do we reduce our Continuous focus on improving cost efficiencies acquisition and administration costs? Product innovation: reducing the complexity of product features
How do Maintain consistent superior investment performance through a robust and we improve competitive investment process our investment performance? Continuous focus on transformation and people development
Appropriate mix of business to optimise overall capital requirements through diversification How do we manage Product development and innovation to optimise capital efficiency of the amount of new business capital held? Appropriate product pricing to ensure hurdle rates are achieved on required capital
INTEGRATED REPORT 2017 17 A decentralised group
Sanlam has a decentralised management structure and conducts operations through five clusters.
Each cluster is focused on specific markets and/or market segments and is supported by a centre of excellence at Group level, which sets tight principles within which the clusters must operate. The five clusters are mutually inter-dependent and complementary in their offerings and approach, thereby ensuring that the value of the whole is larger than the sum of the parts.
Sanlam Group
Sanlam Group Office
Sanlam Sanlam Sanlam Sanlam Personal Finance Emerging Markets Santam Investments Corporate (SPF) (SEM)
Contribution to Group net result from Contribution to Group Equity Value ( ) financial services ( )
Legend Legend SPF Santam SPF Santam SEM Sanlam Corporate SEM Sanlam Corporate Sanlam Investments Sanlam Investments Discretionary and other capital
18 SANLAM A snapshot of Sanlam 01
Sanlam Group Office
Responsible for Group strategy, capital and risk management, and Net result from financial capital allocation to clusters. The following functions provide Group-wide services -R115 million support and coordination: (2016: -R107 million)
Finance Number of employees: Actuarial and risk management 539 Information technology Human resources Market development Brand services
Sanlam Personal Finance (SPF)
Responsible for the Group’s retail life and investment business in South Net result from financial Africa. It provides clients with a comprehensive range of appropriate and services R4 235 million competitive financial solutions, designed to facilitate long-term wealth (2016: R4 099 million) creation and protection. Contribution to Group Sanlam Sky Solutions (Sanlam Sky) is responsible for funeral cover net result from financial business and related services. services 49% (2016: 51%) The Recurring premium sub cluster provides risk underwriting Number of employees: products, excluding funeral cover business, and recurring premium 5 767 savings solutions. Glacier is responsible for single premium life and linked investment savings plan (LISP) solutions. Strategic Business Development is an incubator for new initiatives and manages ancillary services businesses.
INTEGRATED REPORT 2017 19 A decentralised group (continued)
Sanlam Emerging Markets (SEM)
Sanlam’s financial services offering in emerging markets outside South Net result from financial Africa, with the aim of ensuring sustainable delivery and growth across its services R1 793 million various businesses. (2016: R1 557 million)
Focus areas include: Contribution to Group net result from financial Retail and Group life insurance and related business services 21% (2016: 19%) Credit and banking General insurance Number of employees Investment management (subsidiaries): 1 947
Sanlam Investments
Provides retail and institutional clients in South Africa, the United Net result from financial Kingdom and elsewhere in Europe access to a comprehensive range of services R1 227 million specialised investment management and risk management expertise. (2016: R1 096 million)
Focus areas include: Contribution to Group net result from financial Investment management services 14% (2016: 14%) Wealth management International investments Number of employees: Capital management 1 057
20 SANLAM A snapshot of Sanlam 01
Santam
Provides a diversified range of general insurance products and services in Net result from financial Southern Africa and internationally to clients, ranging from individuals to services R851 million commercial and specialist business owners and institutions. (2016: R814 million) Santam’s international diversification strategy focuses on reinsurance Contribution to Group business, specialised insurance products, and its role as technical partner net result from financial and co-investor in SEM’s expansion into Africa, India and Malaysia. services 10% (2016: 10%) Santam’s business units include: Number of employees: 5 991 Santam Commercial and Personal Santam Specialist MiWay Santam Re Santam Emerging Markets Investments
Sanlam Corporate
A recently formed business, targeting chosen corporate clients and Net result from financial offering financial solutions underpinned by: services R558 million (2016: R510 million) Employee benefits (providing risk and investment solutions and administration services to institutions and retirement funds) Contribution to Group Health solutions and products net result from financial Institutional offerings sourced from other clusters services 6% (2016: 6%) Number of employees: 1 327
INTEGRATED REPORT 2017 21 Sanlam’s global presence
Sanlam is one of the 50 largest internationally active insurance groups in the world with a presence in 45 countries. Through SEM, Sanlam has the most extensive insurance footprint in the African continent.
United Kingdom
Ireland
Luxembourg
France
Tunisia USA Lebanon
Morocco
Algeria Saudi Arabia Niger
Mali Burkina Faso Senegal Guinea The Gambia Benin Togo Nigeria
Côte d’Ivoire Cameroon Ghana Uganda Gabon Rwanda Kenya
Burundi
Republic of the Congo Tanzania Emerging markets – direct presence Malawi Angola
Zambia Saham Finances presence Mozambique
Zimbabwe Madagascar
Emerging markets – indirect presence Botswana Swaziland Namibia Lesotho
Developed markets South Africa
22 SANLAM A snapshot of Sanlam 01
Sanlam is among the top three market leaders in eight African countries for life insurance, and eleven African countries for general insurance.
Life insurance market share ()
Botswana Tanzania Rwanda Malawi Zambia Namibia South Africa Ivory Coast
General insurance market share ()
Namibia Malawi Ivory Coast Rwanda South Africa Botswana Angola Morocco Uganda Zambia Zimbabwe
India Philippines
Malaysia
Mauritius
Australia
INTEGRATED REPORT 2017 23 Sanlam’s presence per line of business
Life General Investment Credit/ Country insurance insurance management banking Assistance Reinsurance Other
Algeria
Angola
Australia
Benin
Botswana
Burkina Faso
Burundi ✓ ✓
Cameroon
Congo- Brazzaville
Côte d’Ivoire
France
Gabon
Ghana
Guinea
India ✓
Ireland
Kenya ✓
Lebanon
Lesotho ✓
Luxembourg
Madagascar
Malawi
Malaysia ✓
Mali
Mauritius ✓
24 SANLAM A snapshot of Sanlam 01
Life General Investment Credit/ Country insurance insurance management banking Assistance Reinsurance Other
Morocco
Mozambique ✓
Namibia ✓
Niger
Nigeria ✓ ✓
Philippines ✓
Rwanda ✓
Saudi Arabia
Senegal
South Africa
Swaziland ✓ ✓ Tanzania ✓ The Gambia ✓
Togo
Tunisia
Uganda ✓
United Kingdom United States of America
Zambia ✓
Zimbabwe ✓ ✓ ✓ ✓
✓ Indirect presence via associated companies
INTEGRATED REPORT 2017 25 Sanlam’s presence per line of business (continued)
Business units at 31 December 2017 (100% unless otherwise indicated)
Sanlam Personal Finance Sanlam Emerging Markets
Sanlam Sky Investment management: Recurring premium sub cluster Sanlam Investments, Kenya (57%) via Sanlam Glacier Kenya PLC1 Strategic Business Development SIM Namibia (86%) Sanlam Investments East Africa Limited (74%) Botswana Insurance Fund Management (59%) via BIHL1 Sanlam Emerging Markets General insurance (including Santam’s Retail and Group life insurance and related participation): business: NICO Malawi (direct 49% and 8% indirect via Botswana Life, Botswana (59%) via Botswana NICO Holdings1) Insurance Holdings (BIHL1) Sanlam General Insurance – Tanzania, Tanzania Sanlam Life, Namibia (direct 47% and 3% indirect via NICO Holdings1) Sanlam Namibia Holdings, Namibia (direct 54% Sanlam General Insurance – Uganda, Uganda and 5% indirect via Capricorn Investment (direct 79% and 3% indirect via NICO Holdings1) Holdings) Lion Assurance Company (94%) NICO Life, Malawi (direct 49% and 8% indirect via NICO Zambia, Zambia (direct 49% and 8% NICO Holdings1) indirect via NICO Holdings1) Sanlam Life, Kenya (57%) via Sanlam Kenya PLC1 Shriram General Insurance, India (direct 23% Sanlam Life, Tanzania (64%) and 20% via Shriram Capital) Sanlam Life, Zambia (70%) Pacific & Orient, Malaysia (49%) Sanlam Life, Uganda (99%) Legal Guard, Botswana (59%) via BIHL1 FBN Life, Nigeria (35%) FBN General Insurance, Nigeria (35%) via Shriram Life Insurance, India (direct 23% and FBN Life 19% indirect via Shriram Capital) Soras Assurance General, Rwanda (75%) via MCIS Insurance, Malaysia (51%) Soras Group Soras VIE, Rwanda (75%) via Soras Group Santam Namibia, Namibia (excluding Santam’s Sanlam Mozambique Vida, Mozambique direct share) (37%) (51% direct and 5% indirect via NICO Holdings) Sanlam General Insurance, Kenya (39% indirect Zimnat Life, Zimbabwe (40% indirect via through Sanlam Kenya PLC) Masawara Investments) Zimnat Lion, Zimbabwe (40% indirect via Saham Finances (39,6%) – excluding Santam’s Masawara Investments) share Grand Reinsurance, Zimbabwe (40% indirect via Masawara Investments) Credit and structuring: BIC Botswana (29%) via BIHL Saham Finances (46,6%) Bank Windhoek, Namibia1 (9%) via Capricorn Investment Holdings Letshego1 (15%) operating in a number of African countries via BIHL1 NBS Bank, Malawi1 (7%) via NICO Holdings1 Shriram Transport Finance Company (STFC), India (3% direct and 7% via Shriram Capital) Shriram City Union Finance (SCUF), India (9%) via Shriram Capital
26 SANLAM A snapshot of Sanlam 01
Sanlam Investments Santam1
Investment Management: Santam Commercial and Personal Sanlam Investment Management Santam Specialist Sanlam Africa Investments Santam Re Sanlam Properties MiWay Sanlam Private Equity Santam Emerging Markets (indirect stake in Sanlam Alternative Investments SEM general insurance businesses) Sanlam Structured Solutions Satrix Sanlam Multi Manager International Sanlam Collective Investments Sanlam Corporate Blue Ink Graviton Wealth Sanlam Employee Benefits: Graviton Financial Partners Sanlam Group Risk EasyEquities (30%) SEB Investments Sanlam Umbrella Solutions Wealth Management: Sanlam Retirement Fund Administration Sanlam Private Wealth Simeka Consultants and Actuaries Sanlam Private Wealth Australia (50,1%) Centre (69,6%), an American and global asset Sanlam Healthcare: management company based on Wall Street Afrocentric (26%) Sanlam Global Investment Solutions, providing Sanlam Healthcare Management specialist investment services and international mutual fund administration Summit Trust (65%), an international 1 Listed entities. Refer to the relevant company independent trust services group in Switzerland website for information available in the public domain: Capital Management: BIHL: www.bihl.co.bw Sanlam Capital Markets Letshego: www.letshego.com NBS Bank: www.nbsmw.com NICO Holdings: www.nicomw.com International: Sanlam Kenya: www.sanlam.com/kenya Sanlam UK, comprising: Santam: www.santam.co.za Sanlam Investments and Pensions SCUF: www.shriramcity.in Sanlam Distribution STFC: www.stfc.in Sanlam Private Wealth (99%) Sanlam Four (89,7%) Sanlam Asset Management Ireland
INTEGRATED REPORT 2017 27 The Sanlam stakeholder network
We are committed to mutually beneficial relationships with our material stakeholders. Sanlam’s strategic intent is to create sustainable value for all stakeholders. While we operate in an extended universe of stakeholders, we identify and select our material stakeholders on the basis of their impact on Sanlam’s business and the successful execution of our strategy. These stakeholders are illustrated below:
Partners to Sanlam’s education, social and enterprise development programmes
Providers of financial stability and a sustainable environment for financial Government Providers of skills and expertise services through prudential and that support the activities inherent market conduct regulation to Sanlam’s business model Regulators Employees
The base from which demand for Consumers of Sanlam’s products Sanlam’s products and services is and services to achieve their generated, and from which human wealth creation, management resources are employed and protection goals Civil Clients society
Providers of products and services that enable Sanlam to Primary providers of financial capital conduct its business activities Business Shareholders partners
The intended outcome of our stakeholder value Sanlam’s ability to create mutually beneficial financial creation is to create financially resilient and resilience for individuals, organisations and societies is prosperous individuals, organisations and societies. reflected in RoGEV, our primary performance target for These three groups encapsulate our key stakeholders measuring shareholder value creation. identified above. RoGEV is the outcome of a combination of value Read more in Sanlam’s Resilience Report, which is drivers that are unpacked from page 14 of this report. structured around a specific set of outcomes to build financial resilience and prosperity for each material stakeholder group.
28 SANLAM A snapshot of Sanlam 01
Governance of stakeholder relationships Group Market Development in the Group Office provides a critical support function through face-to- The Sanlam Board and executive management are face and client-centric engagement. This includes responsible for managing Sanlam in a sustainable and established relationships with multiple tertiary stakeholder-inclusive manner. This includes overseeing institutions in South Africa, trade unions, Government the strategic risks that relate to the interface between departments, private sector institutions and affinity Sanlam and its stakeholders, and balancing the needs, groups such as churches. Group Market Development interests and expectations of all material stakeholders in further facilities cross-selling and collaboration between the best interests of Sanlam over time. clusters to execute on market opportunities.
Find out more about the strategic risks facing No significant issues were raised by stakeholders Sanlam from page 118. during 2017. An unfortunate social media incident at MiWay, involving altered content of a MiWay email, Stakeholder relations had the potential to cause damage to Sanlam’s brand Sanlam’s stakeholder strategy guides engagement and image in the South African society. The matter with material stakeholders. An approved stakeholder was resolved in an exceptional manner by MiWay communication policy is in place. Stakeholder management, turning initial negative response on social engagement is continuous and depends on the needs media into a positive outcome. of the various stakeholders and business clusters.
Each business cluster manages stakeholder engagement according to the specific focus in their operations. The clusters report to the Sanlam stakeholder hub on all stakeholder engagement activities and concerns raised on a quarterly basis. The stakeholder hub is a centralised stakeholder database that serves as an issue log. This information is collated and reported to the Social, Ethics and Sustainability (SES) committee.
INTEGRATED REPORT 2017 29 The Sanlam stakeholder network (continued)
Type and frequency of stakeholder engagement
Stakeholder group Key touchpoints
Clients Client engagement occurs at various touchpoints during the course of the client transaction process and all stages of the product life cycle. Client satisfaction is measured regularly.
Read more in the Resilience Report available online.
Employees Employment engagement is ongoing and supported by the connectivity pillar of Sanlam’s Employee Value Proposition (EVP). Each year, Sanlam conducts employee engagement surveys in its largest operations. The results of these surveys inform Group-wide programmes that aim to enhance employee inter-connectivity and engagement.
Read more in the Resilience Report available online.
Shareholders In addition to accessing information on Sanlam’s performance via its Annual Reporting Suite, website and SENS announcements, information sharing with shareholders and investors is facilitated through biannual results presentations, operational updates, the Sanlam investor conference, the AGM, and through ad hoc meetings.
Read more about specific feedback from users of this report on page 3.
Business partners Our business model, especially in SEM, relies on partnerships and collaboration. We rely on the local knowledge and infrastructure of our partners in the markets in which we operate and invest. Our engagement with these stakeholders is therefore supportive and not intrusive. Engagement is formalised through service level agreements, governance structures, reporting requirements and personal engagement. Our business partners are essential in achieving our vision of becoming a leading Pan-African diversified financial services player.
Read more in the Group Chief Executive’s strategic review from page 54 and the online Governance Report.
30 SANLAM A snapshot of Sanlam 01
Stakeholder group Key touchpoints
Civil society The Sanlam Foundation is Sanlam’s primary corporate social investment (CSI) vehicle and is focused on shared-value initiatives that fulfil the needs of society and business. Various CSI initiatives that are aligned with the Group’s priorities are also conducted in- country by SEM. In support of Sanlam’s purpose, all business clusters pursue a specific set of outcomes that build financial resilience and prosperity for society. These outcomes include, among others, development of entrepreneurship, consumer financial education and skills development.
Read more in the Resilience Report available online.
Government Sanlam engages with Government through industry associations and various business chambers. These include the Department of Basic Education (DBE) in South Africa through the Group’s Blue Ladder Schools Programmes, which are aligned with Government’s National Development Plan (NDP).
Read more in the Resilience Report available online.
Regulators The Group office and cluster businesses engage on a regular basis with industry regulators to assist in creating a trusted financial services environment.
Read more in the Resilience Report available online.
INTEGRATED REPORT 2017 31 32 SANLAM