Operational review by the Group Chief Executive

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“The RoGEV per share for 2016 of 11,8% was below the Group’s hurdle rate of 14,1%, largely due to foreign currency translation differences following a sharp strengthening in the rand.”
Ian Kirk
Group Chief Executive

Adjusted RoGEV per share, which excludes the impact of investment market return deviations from long-term assumptions, tax changes and other factors outside of management’s control, and assumes normalised currency movements, amounted to 17,8%, and exceeded the target by a healthy margin.

Sanlam’s five clusters contributed to RoGEV through their implementation of the Group strategy, with the major operational performance highlights and challenges set out below.

Sanlam Personal Finance (SPF)

SPF delivered solid results in a turbulent year, characterised by muted single premium investments and depressed fees as a result of flat equity markets. Discretionary flows were particularly impacted, with investors increasingly facing the harsh reality of political and investment market instability.

Sanlam Emerging Markets (SEM)

SEM’s performance was underpinned by strong organic growth in the Rest of Africa, a recovery in earnings from the Indian credit operations and the first benefits from the Saham Finances, Shriram Life and General Insurance and Zimbabwe transactions.

Sanlam Investments

Pressure on fee income in the asset management operations of Sanlam Investments – from weak equity markets, lower performance fees and lower earnings in the UK – limited growth in the cluster’s contribution to Group earnings to 4%. The new business and net fund flows performances were satisfactory given the challenging operating environment.


Santam’s performance normalised, following an exceptional 2015. The impact of soft pricing and intensifying competition was evident across the group, but particularly in the Specialist businesses. Claims costs and frequencies in Santam Commercial and Personal, Santam Specialist and MiWay increased, with the weaker rand putting pressure on the profitability of most of these businesses. The higher procurement costs on imported motor parts negatively impacted the motor books.

Sanlam Corporate

With the establishment of Sanlam Corporate, Sanlam Employee Benefits (SEB) and Sanlam’s investments in Afrocentric and Sanlam Healthcare were moved from Sanlam Investments and SPF respectively to form the core of the new cluster.

Read more about the financial performance in the Financial review .

Identifying and responding to risks

The Group considers risks from a top-down (strategic) and bottom-up (operational) perspective to create and maintain an integrated view of material risk exposures.


The top-down approach is undertaken at an Executive and Senior Management level and considers the key risks affecting the Group in the medium to long term. The bottom-up approach is undertaken by the clusters and business units, with the assistance of their risk management functions to assess all categories of risks from their perspectives. This involves identifying, managing and monitoring risks in each area of the business. This way, risk management is embedded into the day-to-day operations. Control of this process is provided through maintenance of risk registers and reports in each area. These risk registers are aggregated and reviewed by each cluster’s Finance and Risk committees or forums, with significant and emerging risks escalated to Group level for consideration as appropriate.

Our contribution to using natural resources responsibly

We remain committed to creating awareness among our clients’, employees, business partners and other stakeholders on the sustainable use of our natural resources.


The Group supports conservation efforts aimed at preserving critical ecosystems and protected areas as a means of impacting overall risk management positively. Sanlam has an ongoing partnership with the World Wide Fund for Nature South Africa (WWF-SA) which includes various projects to conserve and ensure the healthy functioning of South Africa’s water systems.

Sanlam has committed R50 million to its partnership with WWF-SA to help secure SA’s water source areas, promote water stewardship and empower local Governments to integrate freshwater protection into their policies and plans. With drought being an increasing systemic risk in South Africa, Sanlam and WWF-SA launched a tool to assess water-related risks within companies in July.

The tool uses local data to assess risks and identify whether these are faced in the company’s operations or the broader basin, and are presented as physical, reputational or governance-based risks. The tool also provides users with a structured set of responses and up-to-date case studies that guide companies on ways to mitigate risk and develop a water stewardship strategy.

Together with Santam’s buildings, Sanlam Group achieved a reduction of 554 124 kWh against the 2014 baseline year. This reduction can be attributed to the implementation of various initiatives including better management of electricity consumption.

Read more about environmental indicators and progress in the supplementary Environmental Impact report online.

Innovation for resilience

With asset owners’ profiles, locations and natures changing, Sanlam has new opportunities to access growth. This demands innovation around product, distribution and operating efficiency.


Product innovation is a persistent feature within Sanlam to drive growth and market share. SPF’s successful launch of new risk products in 2016, and the revamp and integration of Reality into the product set are tangible examples of innovation-driven growth. Other examples of recent product innovations include insurance for train commuters in India, with a combined insurance model that includes Government and their insurer general, as well as Sanlam Go cover that provides life insurance on demand through a mobile platform. The expanded SEM central support structure includes a team dedicated to product development and innovation. Within SI, much focus will be placed on alternative asset classes and passive investment solutions. These initiatives create new and profitable markets that did not exist before.

The Group’s client-centric approach means that it has to approach potential clients in non-traditional ways, and through channels and platforms that are entirely new – and often disruptive to conventional models. The ability to innovate by exploiting new IT paradigms has become critical. This is not purely a technological capability, but relies on integrating various aspects of business architecture such as product, process, business model, experiences and branding. This will receive attention across all clusters, with Santam already having done innovative scenario work to create business contexts for 2025, which includes the rise of fintech as an enabler of disruptive technology that can gain significant market share in a short period of time. Sanlam Go cover is the first experimental product born from SPF’s digital initiative. The opportunity to gain market share through new digital channels promises exceptional future growth potential in Africa, where many countries have leapfrogged traditional technology directly to mobile. Mobile is the only means to reach millions of clients in remote areas.

Exploiting the possibilities presented by new IT paradigms is not only important from a product and distribution perspective, but can be an enabler of improved cost efficiencies. The business intelligence evaluation referred to under the section for strategic risks is focused on attaining dual benefits – supporting product development and client service innovation while at the same time enabling more efficient regulatory compliance.

These technology-enabled initiatives will be priority for Sanlam going forward, and demand client-centric thinking.

Group outlook summary for 2017

Economic growth in South Africa and the commodity-based economies in the Rest of Africa will remain below longer-term potential in 2017, with a resulting impact on the Group’s key continued operational performance indicators.


We, however, anticipate some improvement in general growth rates across most regions during the course of 2017, with some of the African markets and India expected to record robust growth. This should provide some support for improved levels of growth in new business.

Growth in GEV, new business volumes, VNB and net result from financial services is, however, not only dependent on economic growth, but will also be shaped by investment market performance, currency volatility, interest rate cycles and political events, which are even more unpredictable in the current global environment. The Group will remain focused on strategic execution, and we are confident that we have the depth of skills and experience to successfully navigate through these conditions and to continue delivering value to all of our stakeholders.

View average annual real GDP growth

Investment opportunities will remain under consideration, with the focus more on organic growth in existing partnerships in support of the Group’s positioning as a Pan-African diversified financial services group.
View key economic indicators