Sanlam personal finance

Sanlam Personal Finance
R million
Net operating profit
1 715
New business flows
32 042
— SA recurring
1 194
— SA single
21 797
— Non-SA
9 051
PVNB premiums(1)
17 555
2,20% vs 1,93%
Adjusted RoGEV
(1)Life business only.
Share offering
Group profile and shareholding structure

South African operations


Middle and self-employed market focus
Sanlam Individual Life division
100 Life insurance
Sanlam Personal Loans
70 Personal Loans Joint Venture
Multi Data
100 Electronic money transfer
Sanlam Trust
100 Estate and trust services
Sanlam Liquid
100 Debit card and savings facility
Anglo African Finance
65 Niche trade and bridging finance
Sanlam Health Management
80 Medical scheme administration services
Sanlam Linked Investments
100 Linked product provider
100 Loyalty programme
Affluent market focus
100 Financial services for affluent market
(1)Glacier also sources solutions from the middle and self-employed markets above.

Non-South African operations


Sanlam Namibia Holdings
54 Financial services in Namibia
Sanlam Life Namibia
100 Closed fund business in Namibia
Persistency and retention levels continued to improve in 2010. We attribute this largely to our client-centric approach, which places a strong focus on providing clients with appropriate financial advice and high-quality service in the context of their specific financial situations. 

Who we are

We provide clients in the middle, affluent, self-employed and professional markets of South Africa and Namibia with a comprehensive range of appropriate and competitive financial services solutions designed to facilitate long-term wealth creation, protection and niche financing needs.

Engineering these solutions around client needs and delivering the solutions through credible financial advice enables us to grow Sanlam Personal Finance (SPF) on a sustainable basis, thereby maximising shareholder value while building long-term relationships with our clients.

Our competitive advantage is our established client-centric strategy, which is driven by focused market segmentation and diversification of our financial services solutions, as well as our extensive distribution footprint.

At SPF we foster a culture of passion for our clients, placing great emphasis on diversity and innovation. We strive to be an employer of choice for people who share these values.

SPF offers the following financial services and advice, either directly or in conjunction with Group companies or other business partners: 

South Africa

> Client and business protection
  > Life and disability insurance, dread disease, permanent incapacity and sickness insurance, short-term insurance and medical scheme administration 
> Providing for retirement
  > Retirement annuity and preservation fund solutions
> Providing for non-retirement savings needs
  > Endowments, savings accounts and fixed deposits
> Protecting and growing wealth
  > Linked investment solutions
> Managing assets in retirement
  > Flexible investment-linked annuities and guaranteed annuities 
> Ensuring transfer of wealth between generations
  > Estate and trust services
> Transactional requirements
  > Debit card
> Financing and credit needs
  > Personal loans
  > Niche trade and bridging finance


Life (individual and group), linked and unit trust solutions 

2010 in perspective

The dialogue around the management of coastal resources has changed significantly in recent years. Increasingly, biodiversity is acknowledged as something which can benefit positive socio-economic change as opposed to being in opposition with it.
Economic conditions remained tough in 2010 and consumers continued to struggle as a result of job losses and the rising cost of living. The drop in interest rates brought some relief to heavily indebted consumers but impacted negatively on sales of products which are linked to interest rates such as guaranteed plans, annuities and money-market investments. 

The strengthening of the rand and the increase in the offshore allowance for individuals presented new opportunities and saw the launch of our Glacier International offering towards the end of 2010.

Our diversification strategy helped us to cushion the impact of some of the challenges such as lower interest rates and a lack of consumer confidence.

Persistency and retention levels continued to improve in 2010. We attribute this largely to our client-centric approach, which places a strong focus on providing clients with appropriate financial advice and high-quality service in the context of their specific financial situations.

Looking at the numbers, how did we do in 2010?

Total sales grew by 3% with new recurring premiums having increased by 11% and single premiums by 3%. Total South Africa sales grew by 6% and Namibia sales decreased by 1%, while total life sales grew by 3% and non-life sales by 4%.

We are particularly pleased with the 11% growth in new recurring premiums, given the negative impact of the continued tough economic environment on the disposable income of our clients. It was also encouraging to see clients move back into recurring premium savings products such as retirement annuities and endowments, which increased by 12%. Sales of risk products grew by 9%.

Single premiums were impacted by the lower interest rate environment, which resulted in a slowdown of flows into money-market products compared to 2009.

Lower interest rates also reduced sales of products that tie clients into lower interest rates for longer periods, such as guaranteed plans and annuities. Flows into products linked to the improving equity markets and a one-off inflow of R1,1 billion onto the Glacier linked product platform offset some of the negative impact of lower interest rates.

The value of new covered business (VNB) (calculated on similar Gilt yield of 9,4% for both 2009 and 2010) grew by 8% and VNB margins were maintained despite a very competitive environment.

The total net cash inflow of R5,6 billion is 20% lower than in 2009 largely because of the shift from money-market funds, particularly the Glacier and Namibia funds, to equity-related funds as interest rates declined and stock markets improved. The Namibia flows were also impacted by changes in the tax base of interest-bearing unit trusts, which impacted negatively on Namibian money-market funds.

Profits before tax increased by 19% largely due to improved risk- and market-related profits in the life business, as well as higher profits earned by Sanlam Personal Loans due to lower bad debts and increased personal loan advances.

The adjusted return on Group Equity Value of 17,8% exceeded our hurdle rate of 13,4%.

We are proud of the awards SPF received from the Financial Intermediaries Association for our investment products, both in the recurring and single premium categories. We were also a finalist in the risk product category. In addition, Glacier has grown from the third largest Linked Investment platform provider in 2006 to the largest in 2010. 

Strategic developments

Increasing our distribution footprint is one of our key strategic objectives. We are therefore planning on increasing our number of advisers by an additional 400 and supporting brokers by 250 over the next three years. During 2010 we increased our adviser numbers by approximately 250 and invested in several initiatives to increase our broker support. In this regard we have increased our number of broker consultants by 15. We have also set up Echelon Distribution Services, which will provide priority services to selected brokers. In addition, we invested in SFP Advisory Services, a brokerage that services a large client data base.

Over the past number of years the current business model has become less relevant in the lower middle market for a number of reasons such as changing commission models, increased cost of legislation, and intermediaries' preference for more affluent market segments. This has resulted in financial services providers focusing more on markets which can afford these services. We believe that the lower middle market segment has significant potential if it can be reached in a cost-effective manner. We are therefore piloting various initiatives to provide appropriate products in a cost-effective way to this market. A large number of the additional 250 advisers appointed in 2010 will specifically focus on this market.

The Glacier International offering was launched to provide affluent South African clients with innovative ways of investing offshore. The new offering became available in October 2010 and initial new business flows have been encouraging.

The Sanlam Empowerment Fund was also launched in October 2010 and offers black clients access to empowerment funding asset classes and direct investment into BEE deals. Initial feedback from the market has been positive.

Following the merger of Telemed with Bestmed on 1 January 2010, Sanlam Health Management (SHM) acquired Eternity Health Administrators with effect from 1 July 2010, thereby increasing the number of principal medical aid members managed by them to nearly 100 000. SHM is now the fourth largest medical aid administrator in South Africa.

Sanlam Personal Loans (SPL) continued its prudent lending approach and expanded this model to selected Sanlam clients in the lower middle market from November 2010. SPL also started a pilot project to test the viability of offering loans to selected Sanlam clients in the entry-level market.

The Sanlam Liquid Splash account, a competitively priced debit order savings account, was launched towards the end of 2010 and is aimed at younger clients. 

Embracing change

Businesses are still grappling with their water issues and . . . they do not necessarily understand how to effectively get involved in water management.
The South African regulatory environment continues to change frequently.

A discussion paper on Treating Customers Fairly (TCF) was released in June last year which proposes that TCF should apply for the full product life cycle starting with the design, promotion, advice, pre and post sale, and ending at the claim stage. SPF is well positioned for these proposals as our client-centric strategy already embraces many of them.

Conflict of Interest regulations came into effect in 2010, setting out rules and principles that require financial services providers to avoid any conflict of interest between the provider and client. Mere disclosure is no longer adequate. This may result in an increased number of brokers exiting the industry.

The full impact of the new commission regulations will come into effect in 2011. We do not expect this to have a major impact on our sales activities as the phase-in period (2009 and 2010) as well as the bridging finance we provided to advisers have facilitated a smooth transition to the full new commission basis.

The Medical Aid industry will continue to be impacted by the regulatory and political environment, although the latest NHI proposals seem to allow for greater private participation in an NHI environment.

We have started assessing and planning for the implementation of the requirements of the Solvency Assessment and Management (SAM) programme and phase two of the International Financial Reporting Standards for Insurance activities which are expected to be implemented in the next three years.

Employer of choice

We understand the key role people play in delivering on our business strategy and strive to attract, develop and retain highly skilled and competent people.

Achieving our transformation targets remains an important priority. We recognise the importance of matching the demographic composition of our employees, not only with the composition of our current clients, but also our future clients. We aim to achieve this through developing and growing our own staff and appointing appropriately skilled people from the outside.

As an "Investor in People" accredited organisation we are committed to the development and growth of our employees and to maintaining a high performance culture. The SPF Internal Training Academy is just one example of several initiatives to develop our staff on an ongoing basis. In April 2010 we also introduced the disabled learnership programme, in which 18 external learners participated.

Transforming our business is critical and determines our relevance and sustainability into the future. Progress is therefore measured on an ongoing basis and a component of all staff performance bonuses is linked to achieving our objectives in this regard. 

Outlook for 2011

While financial markets and the South African economy are expected to continue their steady recovery in 2011, continued high increases in the cost of living will result in the disposable income of consumers in the middle market remaining under pressure. This will prove challenging for the segments of our business that service predominantly this market. 

Strategic objectives

We will continue with our established client-centric strategy which has proved successful over the past number of years and which is driven by focused market segmentation, diversified financial solutions and extensive distribution footprint. Our key strategic objectives are:
> Targeting reasonable growth of new business sales while maintaining VNB profitability margins. 
> Expanding our extensive distribution footprint while also looking for alternative engagement models. 
> Increasing our penetration in the high potential lower middle market in a cost effective manner. 
> Growing our medical business.
> Pursuing viable initiatives to grow and diversify our business further. 
> Applying our experience in the professional market to more successfully penetrate the self-employed market. 
> Maintaining operational efficiencies with a focus on client experience. 
> Focusing on transformation and remaining an employer of choice. 
> Improving collaboration within the various SPF businesses as well as the wider Sanlam Group. 
> Continuing to renew our technology requirements. 

Our leadership

Executive committee

Lizé Lambrechts Chief Executive
Hennie de Villiers Middle Market
Bernard Manyatshe Information Technology
Anton Gildenhuys Actuarial
Kobus Vlok Distribution
Wally Harris Finance
Robert Goff Human Resources
Anton Raath Glacier

Divisional board and forum membership

Johan van Zyl Chairman of Divisional Board, Human Resources
Flip Rademeyer Chairman of Financial and Risk
Kobus Möller Financial and Risk
Chris Swanepoel Financial and Risk
Human Resources
David Ladds Financial and Risk
Lizé Lambrechts Chief Executive
Heinie Werth