Sanlam Allianz Holdings (kenya) Plc · NSEKE:SLAM
Sanlam Allianz Holdings (kenya) — Sanlam — UBS Global Insurance Conference 2009
58 slides from Sanlam Allianz Holdings (kenya)'s conference presentation, June 2009
Slide 1: Growth Prospects in Emerging Markets
UBS GLOBAL INSURANCE CONFERENCE Growth Prospects in Emerging Markets Sanlam (CEO – Johan van Zyl) : June 2009
Slide 2: Agenda
Agenda • Group Overview • Sanlam in the Context of the SA Market • Strategy and Growth opportunities o Tapping into Existing Client base (Mass Affluent Market) o Exploring New Growth Markets (Lower-income Market) o Exploring New Distribution Channels o Writing Profitable New Business • Strategy & Ou
Slide 3: Group Overview: Our 91-year History
GROUP OVERVIEW Our 91-year History
Slide 4: The Extent of our Business
The Extent of our Business • Total assets under management = R409 billion (£31bn) • Total new business received = R100 billion (£7.5bn) • Operating profit before tax = R4.3 billion (£323m) • Market Capitilisation = ~ R37 billion (£2.8bn) • Personnel = 9,000
Slide 5: Core Purpose & Vision
Core Purpose & Vision The Leader in Wealth Creation Sanlam‟s core objective is the achievement of a sustainable, superior rating to deliver the highest value to shareholders over the long-term Transforming Sanlam from a mutual insurer into a world-class diversified Financial Services Group providing
Slide 6: Sanlam Operational Structure
Sanlam Operational Structure Sanlam Limited Short-term Institutional Corporate & Retail Cluster Insurance Cluster Other Cluster Net operating result: Net operating result: Net operating result: Net operating result: R 1,757m R 737m R 439m (R 131) mill New bus volumes: New bus volumes: New bus volume
Slide 7: Solution's Offering in Retail & Institutional Sectors
Solution‟s Offering in Retail & Institutional Sectors Retail Institutional • Investments • Pension Fund Administration • Savings • Group Risk provision • Risk products • Group Investments and Annuities • Home Loans • Asset Management – Single and Multi- • Trusts and Estate planning Manager • Private
Slide 8: Current Geographical Footprint
Current Geographical Footprint Current
Slide 9: "Life" in SA
“LIFE” IN SA Striking Parallels between Developed Market Economies
Slide 10: Life Penetration (%GDP)
High Penetration Rate in SA Life Penetration (%GDP) 16 UK 14 South Africa 12 10 8 South Korea France Japan 6 Europe Asia World Italy North America 4 Oceania Africa PR China Brazil Germany 2 Latin Am. & Mexico Caribbean Venezuela 0 1000 10000 100000 GDP per Capita (log scale) Source: Swiss Re, Sigma
Slide 11: Highly Concentrated Market in SA
Highly Concentrated Market in SA Market share of SA retail recurring Market share of SA retail single new new business premiums business premiums Remainder Sanlam Remainder Sanlam 10% 15% 20% 22% Discovery 9% Discovery 0% Momentum Momentum Old Mutual 13% 11% 23% Old Mutual 17% Metropolitan Metropoli
Slide 12: Summary of SA Life Market (Mass Affluent)
Summary of SA Life Market (Mass Affluent) • The high premium-to-GDP ratio has often been used to suggest that SA has high penetration levels and is a mature market • A large proportion of premium income is transfer business between life insurers instead of new savings, or transfer from other financi
Slide 13: Strategy & Growth Opportunities
STRATEGY & GROWTH OPPORTUNITIES A Sanlam Case Study Finding Growth in a Mature Market
Slide 14: Global Drivers of Change
Global Drivers of Change From a global perspective, the following are among the key trends impacting life insurers... • Many developed-insurance markets have become saturated • Customers are falling into very distinct behavioural segments • Multi-distribution is on the rise as networks specialise an
Slide 15: Rationalisation and Drivers of Change at Sanlam
Rationalisation and Drivers of Change at Sanlam • Growth based on revenue and profit enhancement: o Client centricity (focusing on a broader range of solutions) o Changing consumer needs (increased consumerism) o Cross-pollination opportunities o Need for entering new growth markets o Focus on multi
Slide 16: Diagrammatic Representation of Strategy
Diagrammatic Representation of Strategy • Maximising Returns for Shareholders • Focus on Client-Centric Solutions Net Business Flows Growth / Diversification Earnings Operational Efficiencies Returns (ROGEV) Optimal Application Capital Strategic Investments Efficiency Return of Excess
Slide 17: Focus on Profitable Growth
Focus on Profitable Growth Key drivers in maximising Sanlam‟s operational performance and delivering sustainable, profitable growth: • Management focus – New business growth, net flows, cost management Net Business Flows Growth / Diversification Earnings Operational Efficiencies Returns ROGEV
Slide 18: New Growth Opportunities: Tapping into Existing Client Base
NEW GROWTH OPPORTUNITIES i) Tapping into Existing Client Base (Mass Affluent Market) Consumerism & Increasing Share of Wallet
Slide 19: Listening to What our Clients Want
Listening to What our Clients Want Client Centricity Integrated services & a shift from product towards needs-orientated perspective
Slide 20: Changing Consumer Demands
Changing Consumer Demands Example of Flows Moving Off-Balance Sheet Development of SA savings industry: Total new business flows 600 2.4 2.11 500 1.87 2.0 1.79 1.77 1.65 400 1.6 times Rbn 300 1.01 1.2 0.87 0.79 0.74 0.75 200 0.63 0.8 0.44 100 0.4 0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 20
Slide 21: Sanlam Adapting to Changing Demands
Sanlam Adapting to Changing Demands Building Capacity to Exploit New Trends Grow alternative revenue sources: Sanlam Group New business flows 100 4.55 4.67 5.0 CAGR 2002-2008 (+22%) 4.48 90 4.04 4.48 83 82 4.0 80 2.91 66 70 3.0 60 51 times Rbn 50 1.47 2.0 43 40 27 1.0 30 18 19 18 20 14 13 11 11 0.0
Slide 22: Retail Clients
Divestment from Absa, allows Sanlam to Education operate directly in provision Savings these banking-related Retire- & Invest- markets ment ment Wealth Management Risk Home cover loan Personal Cover Car & Retail house Medical Clients hold Life- cover style Banking/ Wills & Trans- trusts actional Med
Slide 23: Institutional Clients
SIM SCM SPI SSS SCI Capital Markets Traditional IM: SA SMMI Simeka Cpt & Ldn SEB SIM Risk EM Institutional Traditional IM: incl Nam Employee Clients International Benefits SUS SAMI Specialist: Sanlam Coris Specialist: SA Proper- International ties Octane Blue Ink SIM Global SPE
Slide 24: Cross Pollination Opportunities
Cross Pollination Opportunities Creating the Ability to Cross-sell within the Group Traditional life assurance Short-term Investment insurance management Other financial services
Slide 25: Cross Pollination Opportunities (continued)
Cross Pollination Opportunities (continued…) Untapped Opportunities within the Group Cross-sell Potential at SPF: Clients with a single provider (% untapped) 1.8 100% 1.6 90% SPF‟s life clients have the largest 77% untapped potential of 1.3m clients 1.4 80% 70% 1.2 55% 60% 52% 1.0 million 45% 50% 0.
Slide 26: New Growth Opportunities: Tapping into New Markets
NEW GROWTH OPPORTUNITIES ii) Tapping into New Markets (Lower-income Markets) SA, Rest of Africa & India
Slide 27: Growth Opportunities in South Africa
a) Growth Opportunities in South Africa Entry-level Market (ELM) and Black Diamonds
Slide 28: Entry-level Market in SA
Entry-level Market in SA Entry level market (ELM) • Current size of ELM: 18-20 m people • Only 20-30% of ELM have an insurance-related product Middle- Affluent income 1% 12% ELM 87%
Slide 29: Growth Potential – Size of RSA ELM
Growth Potential – Size of RSA ELM Too poor Has funeral/ 4,9m burial insurance 5,2m (30%) No regular No Access income Total Market 10,3m 5,4m 18m Does not have No need 12,8m (70%) 0,4m Has Access Potential 2,5m 2,1m
Slide 30: Black Diamonds in SA
Black Diamonds in SA Black emerging middle-class: Black Diamond • 3m Black Diamonds at 3Q08 (+15%) • Spending power increased to R250bn in 2008 (40% of SA) • Accounts for 67% of total black spending power • Black Diamond spending power now equals that of total White spending Source: UCT Unilever Ins
Slide 31: RSA Strategic focus going forward
RSA Strategic focus going forward • Improved regional penetration in South Africa • Building our multi-channel distribution strategy • Value for money client offerings • Leverage more off the Sanlam brand • Operational efficiencies to be improved (NTU, lapse rates, costs) • Ongoing improvement in cl
Slide 32: Growth Opportunities in the Rest of Africa
b) Growth Opportunities in the Rest of Africa Strong Growth for at least the next 3-5 years
Slide 33: Growth Potential – Presence in Rest of Africa
Growth Potential – Presence in Rest of Africa Key Start Population Policies SA (ELM) 1982 45 m 933,000 Botswana 1995 2m 250,000 Kenya 2000 37 m 100,000 Ghana 2000 23 m 95,000 Zambia 2002 12 m 30,000 Tanzania 2005 39 m 8,000
Slide 34: Rest of Africa – Prospects / Opportunities
Rest of Africa – Prospects / Opportunities • Why should we be in rest of Africa? o Low insurance penetration (3%) and less competition o Diversification of our business o Strong economic growth (but slowdown recently) o Higher margins available o Does not consume excessive time (small support team)
Slide 35: Rest of Africa – Key Challenges
Rest of Africa – Key Challenges • Competition for wallet from micro lenders • Impact of economic crises (commodity driven economies) – persistency • Insurance skill shortages – management, technical, operational • Premium collection capabilities – many countries cash driven • Evolution of legislatio
Slide 36: Rest of Africa – Key Focus Areas
Rest of Africa – Key Focus Areas • More focus on bancassurance & credit providers • Expansion of distribution channels • Group life business and credit life • Overall product diversification • Focus on operational efficiencies o Distribution capabilities o Quality of business (lapses, NTU‟s) o Cost
Slide 37: Growth Opportunities in India
c) Growth Opportunities in India Meaningful Contribution to Growth in >+5 years
Slide 38: Contribution to emerging market life real premium growth
Contribution to emerging market life real premium growth, 1998 – 2007 Source: National Insurance Authorities, Swiss Re Economic research & Consulting
Slide 39: Growth Potential – India
Growth Potential – India Example: The Advantages of India – Insurance linkages Over 1 Billion Indians – Strong Majority of the population does not economic growth have adequate financial protection The country is looking at an annual Insurance penetration of 4.4% GDP growth of 7-8% (medium term) fol
Slide 40: Successful Tie-up with Shriram
Successful Tie-up with Shriram • 26% Holding in Shriram (with the right to go to 49%), giving Sanlam access to 19,000 registered agents + 10m client base • After 1st three years of operations – growth in new business levels on par with competitors, but lowest cost producer (30% cost to APE) • Only 2
Slide 41: Why we are Positive in Terms of Growth?
Why we are Positive in Terms of Growth? • Good growth prospects available in South Africa – relative low market share and scope for improved regional penetration • Rest of Africa – collective high margins, scope for growth / increased penetration • India – country with vast opportunities (but increa
Slide 42: New Growth Opportunities: New Distribution Channels
NEW GROWTH OPPORTUNITIES iii) New Distribution Channels Exploring Non-traditional Channels
Slide 43: Multi-Distribution Initiatives
Multi-Distribution Initiatives • Insurers are being forced to multi-distribute to retain market access, and increase wallet share • Highly specialised matrix of distribution initiatives, with each network addressing a specific segment of the market, for a specific need • Customers intend to use diff
Slide 44: Multi-Distribution Initiatives (continued)
Multi-Distribution Initiatives (continued…) The Internet is Growing the Fastest Networks in Mature Markets : Mapping of 3-year Change in Market Share vs. Relative Strength of Top 3 Purchase Influencers (%) (Sanlam, Santam and PSG recently launched MiWay – Direct & Internet Solution Provider) (Anothe
Slide 45: Multi-Distribution Initiatives (continued)
Multi-Distribution Initiatives (continued…) Highly specialised distribution networks Distribution Networks in Mature Markets Mapping of Product Specialty vs. Strength of Professional Advice (%) Brokers remain critical in distribution process – especially iro advice driven sales of complex life/savin
Slide 46: Major Trend in SA Distribution Environment
Major Trend in SA Distribution Environment Shift towards Higher Average Recurring Premiums • Unit costs of sale too high: FAIS, FICA and new commission dispensation likely to push advisors up-market • Since 2005, average recurring premium file-sizes grew by 11%pa in SFA and 14%pa in broker channel (
Slide 47: SA Distribution Environment
SA Distribution Environment Current and Proposed Distribution Space % of business → Existing model NSSS % of business → NSSS Experimental / New Opportunities [SanlamConnect] Existing distribution models Lower Income Middle Income Higher Income
Slide 48: New Growth Opportunities: Writing Profitable New Business
NEW GROWTH OPPORTUNITIES iv) Writing Profitable New Business Focus on Costs
Slide 49: Focus on Cost Efficiencies
Focus on Cost Efficiencies • Increased competition and historically lower inflation levels – stringent focus on costs Group administration ratio (%) 50% 45% 42.1% 40% 38.4% 38.1% 36.8% 35.6% 35.3% 35% 33.6% 31.4% 30% 29.1% 27.8% 28.4% 27.1% 25% 2003 2004 2005 2006 2007 2008 Group admin cost ratio SP
Slide 50: Securing Sustainable Profitable Growth: Value of New Business
Securing Sustainable Profitable Growth Growth in Value of New Business • Sanlam‟s value of new business is becoming a more meaningful contributor to Return on EV Split of Sanlam‟s value of new business (VNB) per cluster (Rm) 700 5.25% 4.5% 600 4.50% 4.0% 3.6% 3.75% 500 3.3% 3.00% 400 2.25% 300 1.50%
Slide 51: Securing Sustainable Profitable Growth: New Business Margins
Securing Sustainable Profitable Growth New business margins • Sanlam‟s new business margins now exceed its listed large-cap peer group Gross Sanlam new business margins vs sector (PV NBP basis) 3.50% 3.00% 2.8% 2.7% 2.4% 2.4% 2.5% 2.50% 2.3% 2.1% 2.00% 1.8% 1.50% 1.00% 0.50% 0.00% 2005 2006 2007 200
Slide 52: Securing Sustainable Profitable Growth: Earnings Growth
Securing Sustainable Profitable Growth Earnings growth • Sanlam has created a sound platform from which to grow profitably Group net operating profit (Rm) 3 500 5 year CAGR of 20% pa (per share basis) 3 000 Other 2 500 financial 2 000 services 1 500 1 000 Life 500 0 2003* 2004 2005 2006 2007 2008 SP
Slide 53: Diversification of Solutions Profile
Diversification of Solutions Profile Supported Higher Profitability • Sanlam‟s profits have increasingly diversified and almost doubled over the past 5 years 2008 2003 15% 14% 1% 4% Pre-tax 12% operating 20% 51% R1,541m R2,933m 0% profits 70% 2% 6% 5% SPF SDM SEB SUK SIM SCM SNT
Slide 54: Insights into Strategy
Insights into Strategy Strategic Focus for 2009 and Beyond
Slide 55: Goals set for 2009
Goals set for 2009 Delivering sustainable growth No fundamental shift to existing strategy… However, we need to lift the performance bar and further strengthen our long-term strategic position • South Africa: o Improved efficiency and performance o Continued selective diversification o Transformatio
Slide 56: Particular focus areas for 2009
Particular focus areas for 2009 No major changes, but adjustments in the short term to account for economic realities: Focused on de-risking balance sheet: • Group‟s exposure to credit is being closely monitored • Continue with capital management program • Conservative approach to growth opportuniti
Slide 57: Outlook
Outlook Business Environment : • Uncertainty and volatility in global financial markets • Tough economic climate • Regulatory change Challenges: • Lower asset base • Persistency • Cost control Group‟s portfolio is adequately diversified to spread the risks & creates a sound platform from which to gr
Slide 58: Thank you
Thank you Questions? SEES = RSS) Osaniam