Sanlam developing markets

Sanlam Developing Markets
R million
Net operating profit
New business flows
3 187
— SA recurring
— SA single
— Non-SA
1 799
PVNB premiums
6 584
5,24% vs 5,08%
Adjusted RoGEV
Share offering
Group profile and shareholding structure

South Africa

Rest of Africa


Sanlam Sky (100%)
Botswana Life (54%)
Shriram Life India (26%)
Safrican (85%)
Pan Africa Life Kenya (50%)
ELAC Ghana (49%)
African Life Tanzania (65%)
African Life Zambia (70%)
Sanlam Life Uganda (100%)
NICO Malawi (49%)
“As part of the Group’s strategy to tap into new markets, SDM made progress with a number of initiatives in 2010. These include launching a new life company in Uganda, acquiring a stake in NICO Life in Malawi and finalising a partnership with First Bank in Nigeria.” 

Who we are

Sanlam Developing Markets (SDM) provides affordable financial solutions to the entry-level market in South Africa and to all market segments in other developing markets where Sanlam has established a presence, namely Botswana, Kenya, Tanzania, Zambia, Ghana, Uganda, Malawi and India.

We focus on managing a diverse mix of operations across the African continent and in India with the aim of ensuring sustainable delivery and growth across the various businesses that make up SDM. This is in line with the Sanlam Group objective of becoming the leading financial services player in developing markets.

Our client-centric approach is aimed at protecting and growing the financial interests of our clients across all our markets by providing superior and affordable financial solutions.

The success of SDM is largely due to our principle of partnering with reputable and established operations in developing markets where potential for growth has been identified. Our preferred operating model is one of partnerships, allowing us to allocate our capital resources and expertise to support these partnerships, thereby strengthening their technical base to enable further growth.

The SDM strategy includes improving and growing our existing businesses, complementing our current offering with wider financial services, and expanding gradually into new developing countries. This strategy is underpinned by a strong focus on execution and delivery.

We made good progress in entering new countries this year, with a deal concluded to buy a 49% stake in NICO Life Malawi during the latter part of the year. We also got regulatory approval to become a 35% shareholder in FBN Life Assurance, with our partner in Nigeria, First Bank of Nigeria owning the remaining 65% shareholding. 

2010 in perspective

When the future of the most precious resource of all, water, is under threat . . . the time for talk is over.
The year under review delivered a mixed bag of challenges and opportunities. On the one hand, the economic downturn resulted in further heavy job losses. On the other, interest rates in South Africa fell to levels last seen more than 30 years ago. Those in formal employment enjoyed relatively high wage and salary increases against a declining inflation rate. Unfortunately, household debt levels remained high, limiting any real improvement in discretionary spend. In the rest of Africa, commodity-driven African economies started to show signs of recovery.

Overall, SDM delivered satisfactory new business growth in 2010, notwithstanding the tough economic conditions experienced in most of the markets where we have operations. We achieved an 18% growth in new business volumes for 2010. Most of the businesses outside South Africa contributed to this growth, despite the continuing strength of the rand.

SDM also achieved solid earnings growth of 25% (result from financial services before tax).

We made good progress with a number of new initiatives that will drive future growth. These include launching a new life company in Uganda, acquiring a 49% stake in NICO Life Malawi and finalising our partnership with First Bank in Nigeria. In South Africa we launched a new initiative, icover.

While our diversification strategy certainly played an important role in helping us achieve satisfactory results, we acknowledge that this would not have been possible without the incredible dedication of our staff and management teams who mainly operate in regions and countries far from the Sanlam head office.  
We highlight our progress with diversification and geographical expansion in this Review and we remain positive to continue to make the most of future growth potential.

South African operations

Sanlam Sky Solutions and Channel Life were integrated into a single South African business in the latter half of 2009. During 2010, the primary focus was therefore on bedding down this new integrated business and to proceed with a single strategy aimed at achieving sustainable profitable top-line growth. While we achieved a reduction in operating costs as a result of the integration, we also used the opportunity to cut out sources of new business which were of poor quality, resulting in lower new business growth relative to previous years. Safrican has performed extremely well, delivering profit growth of 126% in 2010. We attribute this to an intensified focus on profitable top-line growth. The group risk area and agency force in Sanlam Sky Solutions also performed above expectations.

While achieving quality new business was a priority, consumers in our target market remained under severe financial pressure. As a result, we experienced a deterioration in premium collection and claims on the in-force book, placing pressure on profit margins.

The need for funeral cover in the low income market presents a substantial growth opportunity, provided the cost of distribution and premium collection can be kept to a minimum. Key initiatives in this area include the launch of icover, joint ventures with the JD Group and the ZCC, and both the Sanlam Sky and Safrican group benefits areas.

As part of our strategy to tap into new markets, we launched icover from Sanlam in November 2010. icover provides affordable and easily accessible funeral cover to South Africa's low income earners who are unable to buy traditional funeral cover because they do not have a bank account or a regular income. The icover funeral cover options are bought off the shelf on a cash basis from a number of participating retail stores.

Towards the end of 2009 Sanlam Sky Solutions entered into a joint venture with Santam and the JD Group, which provides access to the extensive JD Group client base and infrastructure. Initially, sales were only via call centre, but in October 2010 we rolled out in-store policy sales on a pilot basis and are pleased with the take-up thus far.

The Sanlam Sky Group Benefits division was also very successful in 2010 through partnerships with affinity groups such as funeral parlours and church groups, and by employing innovative mobile technology which enabled the company to collect premiums and pay claims in remote areas of South Africa. Our ZCC partnership in particular remains strong. 

Rest of Africa operations

The WWF Sanlam Living Waters partnership helps to address the underlying socio-economic reasons for environmental degradation - in other words, Sanlam is investing in a cause, not just a symptom.
Our African operations form an integral part of Sanlam's diversification strategy. Despite the fact that several of the African countries where we have a presence were hard hit by global economic woes, with the strength of the rand further diluting the growth experienced, we have seen a solid overall performance from our African operations in 2010 and we remain very positive about the prospects for further growth. We have started diversifying into wider financial services and continue to leverage off our bancassurance partnerships across the continent. At the same time, we have expanded into Uganda and Malawi, while the Nigerian operation is already operational. Our medical business, Sanlam Health International, is now up and running and is expected to write its first premiums in early 2011. 
Botswana Life, in which we have a 54% shareholding, delivered moderate growth due to the rand strength having diluted some of the growth and a lag in recovery from a very difficult 2009, in which Botswana was affected by a plunging world demand for rough diamonds and severe stock market volatility.

Botswana Life managed to retain a life insurance market share in excess of 80%. During 2010 the focus was on bedding down new ventures initiated in 2009 in order to diversify our revenue streams. 2010 was the first full year that our 14% stake in Letshego Holdings (a personal loans provider) was equity accounted due to our significant influence on the Letshego board. This business is generating strong earnings as well as providing Botswana Life with good credit life volumes and other cross-selling opportunities. We have also expanded into the short-term insurance market through our acquisition of Legal Guard.   
  Our operation in Ghana, through a 49% shareholding in Enterprise Life Assurance Company (ELAC), is the fastest growing business in our portfolio outside of South Africa and now has over 190 000 in-force policies. In 2010 our focus was on expanding our distribution capability. ELAC is currently the second largest life company in Ghana with the state-owned insurer being the biggest. Our ambition is to grow ELAC into the first position. 
  Economic conditions in Kenya remained difficult during 2010 and the market remains highly fragmented with some 24 life insurers in operation. Despite this, Pan Africa Life, in which we have a 50% shareholding, achieved good growth in both new business volumes and operating profit in 2010 (albeit off a low base) and remains one of two top players in the local industry. 
Other African operations
  > The Zambian economy recovered well in 2010 and the new leadership of African Life Zambia has been delivering pleasing results. We have seen a significant turnaround in new business volumes and persistency. In 2011 the focus will be on ensuring the sustainability of this turnaround. 
  > Tanzania did not perform to our expectations in 2010 and we intend to review our business model and positioning in 2011. 
  > We expanded into Uganda in the second quarter of 2010. Sanlam Life Insurance Uganda is a greenfields operation wholly owned by Sanlam. Our focus has been on creating distribution channels and identifying opportunities. We believe Uganda offers excellent growth potential. 


Shriram Life is a joint venture between the Shriram Group and the Sanlam Group. Our shareholding in Shriram Life remains at 26%. The Indian Government placed on hold a proposal to raise the foreign direct investment limit to 49%, which would have allowed us to increase our holding in Shriram Life.

Following a disappointing performance in 2009, mainly as a result of the global financial markets crisis, Shriram Life experienced strong growth and new business volumes in 2010. However, during 2010, the Indian regulator amended regulations to further reduce charges on products and regulate distribution. Although the impact on Shriram's 2010 results is limited, we expect a negative impact on both volumes and profitability going forward.

The NEW (North, East & West) Channel, which was launched in June 2009 with the aim of increasing Shriram Life's footprint across India, has been repositioned to focus more on efficiency and achieving sustainable growth given the changed regulatory environment in which it has to operate. As a result, the business has been restructured extensively and the leadership has undergone several changes.

The challenge of an ever evolving regulatory environment in India remains, and will continue to put pressure on future profitability levels. We will therefore have to keep reviewing our product range and distribution models to ensure future profitable business. We remain confident in the Group's growth potential in India, and expanding and participating in other financial services with the Shriram Group remains an option. 

Gearing for sustainable growth

In order to achieve sustainable growth, we need an ongoing focus on the efficiencies of our operations, including persistency, new business quality, widening our client base, and expanding distribution capabilities through bancassurance agreements and relationships. In addition, we need to identify and seize new opportunities for growth as they present themselves in other developing markets, mainly in Africa and India.

Operation-specific initiatives include: 

South Africa

> Bedding down our new initiatives including the JD Group strategic alliance and icover, and leveraging off key relationships with the ZCC and selected banks. 
> Tight cost control and stabilising systems and processes. 
> Focusing on new business quality and client retention. 
> Diversifying sources of new business, geographically and by using alternative distribution approaches. 

Rest of Africa

> Consolidating our existing life business in Botswana with a strong focus on retention while bedding down the new short-term business. 
> Aggressive volume growth in Ghana via bancassurance, brokers and group business. 
> Profitable new business growth in the smaller African businesses with a continued focus on new business quality. 
> Rolling out new systems in most of our other African operations. 
> An overall and continuous focus on cost efficiencies. 
> Successful roll-out of new initiatives including Sanlam Health International and Uganda. 
> Focused delivery and implementation in conjunction with our new partners in Nigeria and Malawi. 
> Selective expansion into new countries.


> Adapting to the new regulatory environment in India by changing the product mix and distribution strategy. 
> Continuing the roll-out of the NEW Channel following its restructuring. 
> Exploring participation in other financial services in India. 

New markets

> Explore longer term possibilities in Indonesia and other selected South East Asian markets. 

Our leadership

Executive committee

Heinie Werth Chief Executive
Anne Livingstone South Africa
Margaret Dawes Rest of Africa
Cornie Foord Operations and IT
Steven Mostert India and Special Projects
Robert Dommisse Chief Financial Officer

Divisional board and committee memberships 

Non-executive directors

Johan van Zyl Chairman of Divisional Board, Human Resources 
Lizé Lambrechts  
Kobus Möller Audit, Actuarial and Risk
Temba Mvusi  
Flip Rademeyer Audit, Actuarial and Risk
Tom Wixley Chairman of Audit, Actuarial and Risk, Human Resources 

Executive directors

Heinie Werth Chief Executive
Anne Livingstone  

Other business heads

Nthabiseng Mmatli Chief Executive Officer:
Safrican Insurance Company 
Regina Sikalesele-Vaka Group Chief Executive Officer:
Botswana Insurance Holdings Limited 
Gary Corbit Chief Executive Officer:
African Life Assurance Company (Zambia) Limited 
Charles Washoma Chief Executive Officer:
African Life Assurance (Tanzania) Limited 
Tom Gitogo Chief Executive Officer:
Pan Africa Life (Kenya)
CC Bruce Executive Director:
Enterprise Life Assurance Company Limited (Ghana) 
Marguerite de Waal Chief Executive Officer:
Sanlam Uganda 
Ramachandra Duruvasan Managing Director:
Shriram Life
Akhila Shrinivasan Managing Director:
Shriram Life 
Osman Karim Chief Executive Officer:
NICO Life Insurance (Malawi)