05 CHAPTER HEADER 95 INTEGRATED REPORT 2019 CLUSTER REPORT: SANLAM EMERGING MARKETS R2 632 million Net result from financial services (2018: R2 038 million) 27% Contribution to Group net result from financial services (2018: 23%) 4 920 Number of employees (subsidiaries) (2018: 4 730) SEM About SEM The SEM cluster is responsible for Sanlam’s business services (life insurance, general insurance, health, retail credit, asset management and specialist general insurance offerings) in emerging markets, outside South Africa. SEM leverages its expertise and experience at a cluster level to provide a wide range of support services and resources to its in-country operations, which in turn provide clients with innovative financial solutions. Additional capacity and technical expertise are sourced from Santam, SPF and SIG as necessary. SEM contributed 27% to the Group net result from financial services and 28% to GEV, making it the second largest cluster in the Group. Strategic intent: to be a leading Pan-African financial services group, complemented by a meaningful presence in India, Malaysia and Lebanon Leading • Market development • Governance and ethics • Thought leadership Pan-African footprint • Strong local businesses • Comprehensive and relevant footprint Go-to partner • Multinationals • Other strategic alliances Client centricity • Relevant brand and products meeting client needs People • Employer of choice • Employ the best talent • High performance culture
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CLUSTER REPORT: SANLAM EMERGING MARKETS€¦ · Governance, risk and compliance SPA Life SPA GI India Malaysia Lebanon Corporate affairs Multinational corporations and strategic alliances
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05CHAPTER HEADER
95INTEGRATED REPORT 2019
CLUSTER REPORT: SANLAM EMERGING MARKETS
R2 632 millionNet result from
financial services (2018: R2 038 million)
27%Contribution to Group net
result from financial services (2018: 23%)
4 920Number of employees
(subsidiaries) (2018: 4 730)
SEM
About SEMThe SEM cluster is responsible for Sanlam’s business services (life insurance, general insurance, health, retail credit, asset management and specialist general insurance offerings) in emerging markets, outside South Africa. SEM leverages its expertise and experience at a cluster level to provide a wide range of support services and resources to its in-country operations, which in turn provide clients with innovative financial solutions. Additional capacity and technical expertise are sourced from Santam, SPF and SIG as necessary.
SEM contributed 27% to the Group net result from financial services and 28% to GEV, making it the second largest cluster in the Group.
Strategic intent: to be a leading Pan-African financial services group, complemented by a meaningful presence in India, Malaysia and Lebanon
Leading
• Market development
• Governance and ethics
• Thought leadership
Pan-African footprint
• Strong local businesses
• Comprehensive and relevant footprint
Go-to partner
• Multinationals
• Other strategic alliances
Client centricity
• Relevant brand and products meeting client needs
SEM’s key focus is to leverage its expanded footprint through profitable organic growth of its existing businesses, focusing on key markets. Our unmatched Pan-African footprint provides a unique opportunity to be the go-to partner for multinational corporate clients and intermediaries, and to enter into strategic alliances with other distribution partners. This is augmented by strong local businesses and an in-country retail and corporate focus that enables us to provide a complete suite of products for all clients in different markets. The SEM group office provides in-country business partners with expanded central support capabilities to execute initiatives. This is underpinned by a strong focus on delivery and fostering a high-performance culture.
Increased regulatory capital requirements in some markets may lead to market consolidation and we will continue to pursue structural growth opportunities as these arise. To enhance our footprint, the short-term focus for Ethiopia and Egypt is to partner with a local company as a product and technical skills provider, which could result in equity shareholding. However, the latter is not an immediate priority.
With a range of existing products
Life insurance General insurance
Health Reinsurance
Specialist Insurance Specialist Insurance
Assistance businesses Asset management
Retail credit To the following clients
Retail Commercial
Institutional Corporate
SEM consists of the following entities
SEM Group Office SPA Life Insurance SPA General Insurance Middle East/Asia
Functional support teams, based in Cape Town, Johannesburg and Casablanca – including:
• finance and reporting
• risk & compliance
• operations & IT
• HR
• corporate services
• mergers & acquisitions
23 life insurance businesses in 23 countries (20 subsidiaries and 3 associates) – including:
• 4 asset managers
• 2 retail credit businesses
26 general insurance businesses in 26 countries (22 subsidiaries and 4 associates) – including:
• 18 assistance businesses
• 15 health businesses
• 8 reinsurance operations)
7 businesses in 3 countries (2 subsidiaries and 5 associates) – comprising:
• 2 life insurers
• 2 general insurers
• 1 composite insurer
• 2 retail credit businesses)
Which serve the following countries
Sanlam Pan-Africa Sanlam ME/Asia
7 countries(Southern Africa)
5 countries(East Africa)
2 countries(Anglophone West Africa)
18 countries(Francophone North
and West Africa)
3 countries(Lebanon, India and Malaysia)
Through our distribution partners
Brokers Bancassurance Telcos
Tied agents Direct Aggregators
97INTEGRATED REPORT 2019
04OUR 2019 PERFORMANCE
An overview of SEM’s operating model
SEM underwent a major transformation following the acquisition of the remaining 53% stake in Saham in October 2018. This included the ongoing onboarding of the Saham businesses in the short term as well as facilitating the transition to a new operating model. Sanlam Pan Africa (SPA) was established as a sub-cluster to create focus on our African operations, comprising two vertical lines of business: a general insurance line, which includes health and assistance, and a life insurance line, which includes asset management and retail credit. The Other International sub-cluster comprises our India, Lebanon and Malaysian businesses. Both sub-clusters are supported by a reconfigured SEM Group Office to remove unnecessary duplication of support functions.
Implemented in 2019, this operating model enables SEM to manage the complexities of the African and other international businesses and its widespread operating base. Importantly, it enables us to optimise capital allocation and enhance operational efficiency, which is critical if we are to meet the required returns on investment.
To grow the specialist general insurance lines in Africa, we partner with Santam who provides expertise and technical support. Good progress was made to bed down effective reporting structures and systems for collaboration between Santam specialist businesses and SPA GI.
We will continue to support all our businesses in the various markets. However, given the geographic diversity as well as market maturity and growth potential, we have identified 10 countries within our portfolio that will receive prioritised focus. In Africa these countries include Morocco, Côte d’Ivoire, Nigeria, Kenya, Angola, Botswana, Namibia and Mauritius (focusing on reinsurance and specialist businesses, Saham Re and Continental Re). In the Middle East and Asia, India and Lebanon (due to its relative market size) will be our priority markets.
Sanlam Emerging Markets (SEM)
Human resources
Sanlam Pan Africa (SPA)Other international
Sanlam Middle East and Asia (SME/A)Finance/actuarial
Operations/IT
Governance, risk and compliance
SPA Life SPA GI India Malaysia Lebanon
Corporate affairs
Multinational corporations and strategic alliancesMergers and acquisitions
SEM is a complex cluster with great opportunities as well as challenges, which means we need to prioritise and focus on those aspects of the business where value can be extracted.
A key focus is on driving profitable organic growth of our in-country businesses. However, an additional opportunity to grow our general and life insurance portfolios is leveraging our footprint to offer a one-stop service to multinational companies, brokers and insurers. In particular, strategic alliances with bancassurance partners, telecommunication companies and aggregators offer strong distribution channels across the continent.
The SEM opportunity Africa’s economic, technological and infrastructural growth potential presents a significant business opportunity. Importantly, GDP growth in most of the African countries where we operate exceeded that of South Africa in the last five years. Many also outperform developed and other emerging markets in the rest of the world.
Ang
ola
eSw
anti
ni
Nam
ibia
Leso
tho
Nig
eria
Gab
on
Co
ngo
Alg
eria
Tuni
sia
Mo
rocc
o
Mo
zam
biq
ue
Mal
awi
Cam
ero
on
Zam
bia
Mau
riti
us
Bo
tsw
ana
Tog
o
Mal
i
Mad
agas
car
Nig
er
Gam
bia
Ken
ya
Gui
nea
Ben
in
Gha
na
Tanz
ania
Bur
kina
Fas
o
Sen
egal
Rw
and
a
Cô
te d
'lvo
ire
Eth
iop
ia
So
uth
Afr
ica
EM
Glo
bal
Pan-African GDP growthDriving accelerated organic growth over the medium to long term
2018 2019 2020
This complements the diversification created by SEM for the Sanlam Group as the spread of markets, products and product lines across different growth regions contributes to resilience and risk mitigation. Our focus on standard system implementation, regulatory compliance, financial management and actuarial expertise strengthens the cluster’s in-country operations. The ability to transfer skills to those markets and standardise offerings creates value for business units, employees, clients and broader society.
The growth opportunity is predicated on low insurance penetration and Africa’s demographic dividend, underpinned by a growing labour force, rapid urbanisation as well as a burgeoning middle-class in many markets with increasing disposable incomes and demand for goods and services.
In the Other International sub-cluster, the India and Malaysia economies are forecasted to continue with robust GDP growth going forward.
We are well positioned to increase insurance penetration and uptake as the cluster is gaining a deeper understanding of client insights and needs across different markets. We further adopt a client centric approach to product design and our distribution channels are effective and resilient. Regulatory changes unfolding on the continent further support the insurance business proposition.
Outside of South Africa, general insurance has a higher penetration rate than life insurance. While opportunities exist across both lines, there is a longer-term opportunity for us to grow our life portfolio by increasing and optimising distribution and launching new products. In particular, Sanlam’s deep life insurance expertise positions us well to grow this line of business, which spans across a number of markets with favourable demographic profiles, strong economic growth prospects and low insurance penetration. This includes North and Francophone Africa, which are currently predominantly focused on general insurance.
101INTEGRATED REPORT 2019
04OUR 2019 PERFORMANCE
Our African footprintMarket share target: Top 3 Africa, Top 10 India and Malaysia
Angola
Nigeria
Morocco
Mozambique
Zambia
Tanzania
Rwanda
South Africa
Botswana
Côte d'lvoire
Namibia
Uganda
Lebanon
Kenya
Zimbabwe
Malaysia
India
Developed
Malawi
Life insurance Market share/Position General insurance Market share/PositionCountry and e�ective interest
68% 50%
60% 60%
100% 100%
57% 57%
70% 57%
100% 62%
59% –100% 37%
56% –
47% 47%
99% 82%
38% 38%
35% 35%
57% 39%
40% 40%
24% 24%
51% 49%
42% 43%
Various –
– 23%
68,0%/1
63,0%/1
59,0%/1
42,0%/2
29,0%/1
27,0%/1
25,0%/2
25,0%/2
15,0%/3
15,0%/4
10,6%/4
14,0%/3
5,0%/7
7,7%/4
4,0%/6
2,0%/120,7%/17
0,2%
–
3,0%/12
23,8%/2
20,0%/1
35,0%/1
10,3%/4
22,0%/1
37,0%/1–
25%/1
16,4%/2
5,0%/7
2,0%/18
2,0%/18
15,8%/2
17,6%/1
2,0%/191,2%/19
–
18,7%/2
Contribution to Group Equity Value at 31 December 2019
SPA
Non-Life
SPA Life Other international
(India/Malaysia/Lebanon)
58%2019
26%
16%
2019 operational performance overview Performance was characterised by satisfactory growth in new business volumes in most of the SEM operations. Negative impacts included high general insurance claims experience in key Saham markets, the weakening of the Angolan and Zimbabwean currencies, soft topline growth in Kenya as well as pressure on the Lebanese economy and general operating environment, which detracted from portfolio results. The impact of operational challenges in certain markets was mitigated by the geographic diversification of SEM’s profit sources.