Annual report 2016 |

Value creation through the Sanlam business model

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The six capital context for Sanlam

The six capitals represent the stores of value that are the basis of an organisation’s value creation
– Capitals background paper for 'IR', March 2013

The Group has been creating value for stakeholders since 1918. The Group acknowledges that value perceptions differ per stakeholder and that strategic decisions have to balance their interests, which are sometimes conflicting. The ability to understand the trade-offs and long-term consequences of these choices is a Sanlam strength, evidenced by the value created for stakeholders over many decades.

In 2015, Sanlam defined six capitals that are required by the Group to be able to operate. These capitals are recommended by the 'IR' framework. Given the nature of the Group’s operations it has a relatively low impact on manufactured and natural capital. These two capitals are therefore referenced below but not dealt with further in this report. Within the context of social and relationship capital, specific emphasis is placed on the relationship with regulators given the importance of this stakeholder for Sanlam as a financial services group with a multinational footprint.

Material capitals

Financial capital

This capital includes revenue from products and services offered to clients and investment return earned on the shareholders’ fund.

Public listings on the JSE and NSX provide further access to share capital. Sanlam’s financial strength enables it to issue subordinated debt as part of its capital structure.

Human capital

Sanlam depends on the individual and collective competencies, capabilities, talent and experience of its employees to manage the business efficiently, understand client needs, develop and distribute appropriate products and services and effectively manage the risks that the business is exposed to.

Human capital also resides in the beneficiaries of the Sanlam Foundation’s education and bursary programmes, who are potential future employees.

Intellectual capital

This capital includes the Group’s intellectual assets, such as strong institutional knowledge, efficient operational processes and IT systems, as well as mature risk management practices.

These intangible assets facilitate knowledge sharing and value creation between Sanlam’s employees, operations and the markets where the Group and its subsidiaries operate.

Social and relationship capital

Sanlam relies on strong relationships with stakeholders to sustain its social license to operate. The WealthsmithsTM and The Sanlam Way directs the Group’s relationships, client-centric culture and way of doing business.

Sanlam is dependent on an efficient regulatory environment that promotes responsible products and services, fair treatment of clients and fair competition between participants in the industry. Cooperation with regulators is therefore a key relationship capital.

Other capitals

Manufactured capital

Physical assets used by the Group to develop products and services, and deliver those products and services to market. These include the Sanlam, Santam and Sanlam Investments head offices in Cape Town, with additional offices and branches across the markets where the Group and its subsidiaries operate.

Sanlam makes use of infrastructure that includes road and air travel, and communication technology. Communication technology is particularly relevant for delivery of the digital component of Sanlam’s omnichannel distribution approach.

Natural capital

Sanlam’s use of natural capitals relies predominantly on electricity and water. However, given the nature of financial services, the Group’s direct impact on the environment is relatively low.

The Group invests clients’ and shareholders’ funds in businesses that may have a significant impact on natural resources. As a signatory to the United Nations Principles for Responsible Investing, the Group favours companies that demonstrate sound environmental practices.

Business model

In considering the sustainability of the Sanlam business model, the future availability and supply of each capital is assessed.

Download our business model


The Group furthermore considers the ease of access to each capital, as this is an indicator of potential operational risk. The assessment of potential positive or negative impacts on society for each capital, is based on Sanlam’s use, transformation and replenishment of each capital. According to the analysis below, Sanlam can have a potential negative impact on society in terms of the following capitals:

  • Financial – due to Sanlam’s size and position as a domestic systemically important financial services player, there is risk that the Group can destroy financial capital for society due to non-performance or failure.
  • Social and relationship capital – if Sanlam does not successfully contribute to transformation, the Group will have a negative impact on society by not contributing to the development of communities and empowerment through job creation and enterprise development. In addition, if Sanlam does not foster a good relationship with regulators it can loose its license to operate, which will have a negative impact on all capital providers.

The supplementary reports address the sustainability of each capital and explains how Sanlam takes a long-term mitigating approach, especially where some of the capitals can become limited in supply or non-renewable.

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Sanlam’s financial solutions

Sanlam’s financial solutions are aimed at meeting clients’ needs for wealth creation and protection. These needs are particularly prevalent in the markets where the Group operates, given low levels of savings and insurance penetration.

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Sanlam’s financial solutions are aimed at meeting clients’ needs for wealth creation and protection. These needs are particularly prevalent in the markets where the Group operates, given low levels of savings and insurance penetration.

The 2016 Sanlam Benchmark survey consisted of quantitative studies with pensioners, principal officers of stand-alone retirement funds, and representatives of participating employers in commercial umbrella funds in South Africa. The Research Insights Summary report is based on the team’s collective analysis and insights of more than 400 interviews and discussions.

Value creation prerequisites

The capitals described in this section provide the necessary inputs for Sanlam to develop and provide financial solutions.


Sanlam’s sustainability over the long term is, however, inextricably linked to four key prerequisites without which the Group will not be able to create value. These prerequisites are described in the table below, which also indicates the related capital, the strategic pillars affected as well as the material sustainability themes through which prolonged availability is managed. Key strategic risks linked to each prerequisite are also indicated.

View table

Key strategic risks

The Group’s ability to provide the benefits underlying its products and services and to sustainably create value for all stakeholders is exposed to a range of risks.


The key top-down strategic risks are summarised below and are mitigated through a mature risk management governance structure.

  • Poor economic growth: Curtailed global economic growth could hamper the Group’s new business and earnings growth prospects. Consumers’ disposable income remains under pressure thus directly impacting retail business flows.
  • Threats to Group’s relevance (The 4th industrial revolution and digital disruption): The technological revolution is fundamentally altering the way Sanlam’s current and future clients, employees, partners and other stakeholders live, work and relate. The Group’s competitive position can be compromised through failure to respond.
  • Simultaneous regulatory implementation and uncertainty impact the Group’s business model, competitive position and operational efficiencies.
  • Diversified growth initiatives come with greater operational complexity and other strategic risks as the Group’s footprint grows.
  • Increased exposure to new areas or risk types outside the Group’s core expertise due to acquisition, diversification and innovation.
  • Demographic change/transformation challenges/ ageing population impacts on the Group’s relevance and the appropriateness of its products and advice.
  • Cyber risk emanating from information and information technology infrastructure and related activities.
  • Human resource scarcity and stretched resources: There is a huge demand and strain on the Group’s human resource capabilities. In addition to operational challenges the Group might lose its better resources as they seek alternative work environments with more manageable workloads.
  • Rising income and wealth inequality that threatens social stability.

These risks are managed on a preventative basis as far as possible through various risk management activities. However, should risks materialise, the financial capital held by the Group is available to absorb the financial impact thereof to ensure that the Group remains solvent to honour its commitments towards clients. Therefore, financial capital is a key safeguard to protect clients’ trust in the business and the ability of the business model to create value.

Read more about these risks in the Group Chief Executive’s operational review

Improving the Group’s value creation ability over time

To remain competitive, the Group has to be better at value creation than its competitors. This entails:


  • Creating better value for shareholders to ensure continuous access to financial capital at the lowest possible cost.
  • Creating better value for clients through a client-centric culture and optimised processes and scale. The Group’s legacy of policyholder ownership entrenched a culture where decisions are weighed according to their value to clients. This is supported by a disciplined and consistent approach to providing appropriate financial advice.
  • Creating better value for employees and intermediaries (tied agents and independent brokers) to ensure that the Group attracts and retains the best skills.
  • Creating better value to society, which supports sustainable demand for the Group’s products and services over the long term.
  • Creating better value for regulators by actively contributing to continued improvement in the regulatory environment.

A consistent theme associated with value creation over the past few years relates to diversification from a product, market segment and geographic perspective. The Group evolved from a South African life insurance company to a fully edged financial services group (excluding transactional banking) with an international footprint. In the medium to long term, value creation will focus on balanced growth: growing, consolidating and integrating existing businesses, while at the same time looking for opportunities to further expand the current footprint.

Read more about these risks in the Group Chief Executive’s strategic review

Recognition for value creation

Industry awards

Industry awards are an external mechanism to benchmark value creation and provide feedback on how the Group progresses in different areas of value creation. Awards received this year include:

Several Best Fund awards at the 20th annual Raging Bull Awards Ceremony in Cape Town.

Takalani Sesame, Sanlam’s multi-language, edutainment and multimedia programme, won a South African Film and Television award (SAFTA) for Best Children’s Show.

Sanlam brand award highlights at the Loeries:

  • 1 Show Bronze pencil-CSR: online films and video “Sanlam One Rand Family”
  • Bookmark awards 1 bronze “Sanlam One Rand Family”

Sanlam Private Wealth (SPW) was named South Africa’s top Wealth Manager for the third consecutive year following the 2016 Intellidex – Moneyweb Top Private Banks and Wealth Managers surveys.

Sanlam was included in the newly launched FTSE4Good Emerging Index and retained its position in the FTSE/JSE Top 40.

Saham (Morocco) awarded Best Insurance and Reinsurance Company in Africa for 2015 by the African Insurance Organisation.

World Finance, organisers at the prestigious World Finance Global Insurance Awards, awarded FNB Insurance Best Life Insurance Company in Nigeria 2016.

Botswana Insurance Holdings received Best Performing Ai100 Company and Ai100 CEO of the Year awards from Africa investor (Ai).

Key indicators for shareholders

The Group’s primary performance target for measuring shareholder value creation is Return on Group Equity Value (RoGEV).