Financial Overview Heinie Werth
Market and Product Philosophy Anton Gildenhuys
OperationsHennie de Villiers
Distribution, Sanlam Life Strategy Lizé Lambrechts
Financial Overview
Heinie Werth
Financial OverviewFinancial Overview
HeinieHeinie WerthWerth
R Million Half year
2004 2003 Var03
Life new business APE 776 744 4%
New business EV 123 95 29%
New business EV margin 16% 13% -
Net cash flow 1 601 -957 2 558
Life 185 -2 101 2 286
Non life 1 416 1 144 272
Profit 762 668 14%
Key Results Individual LifeKey Results Individual Life
R Million Half year
2004 2003 Var03
Admin 141 -3 -%
Risk 210 213 -1%
Market related 411 458 -10%
Profit before tax 762 668 14%
Admin cost ratio 36.1% 39.2% -
Profit Analysis Individual LifeProfit Analysis Individual Life
6 Year Trend — Admin costs Individual Life6 Year Trend — Admin costs Individual Life
800
1 000
1 200
1 400
1 600
1 800
2 000
2000 2001 2002 2003 2004
R'm Actual 2000 base
R Million Half year
Total costs — 2003* 1 026
Add Inflation (5.4%) 55
Add MIA 37
Potential costs — 2004 1 118
Less Net savings -121
Total costs — 2004* 997
2004 estimated annual savings
- effective 285
- annualised 300
* Costs = admin costs plus other sales remuneration
Recon of Cost Savings — Life GroupRecon of Cost Savings — Life Group
R Million Half year
Allocation of savings (pre tax) 121
Acquisition 66
Maintenance 38
Other 17
Gross impact on EV (after tax) 105
Acquisition 46
Maintenance 59
Cost Savings — impact on Life Group NUBevCost Savings — impact on Life Group NUBev
Impact on profit for change in : Rm
Short term interest (1%) 45
Equity markets (10%) 30
New Business
- recurring legacy (10m) 6
- recurring millenium (10m) 2
- single (100m) 3
Impact on NUBev for change in :
- new recurring (10m) 3.5
- single (100m) 5.7
- Acquisition cost (10m) 7.0
- Maintenance cost (10m) 3.5
Sensitivity analysisSensitivity analysis
Market and Products
Anton Gildenhuys
Market and ProductsMarket and Products
Anton Anton GildenhuysGildenhuys
Market segmented focusMarket segmented focus
Success in each market segment dependent on:
• Market potential
• Client contact
• Advice model
• Distribution model
• Marketing
• Product support
• Product design
• Client service
• Segment profitability (result of all the above)
Market segmented focusMarket segmented focus
Market segmented teams responsible for:
• Aligning components
• Allocating resources to areas that will yield maximum result
Product StrategyProduct Strategy
QualityQualityInnovationInnovation
PricePrice
Product StrategyProduct Strategy
InnovationInnovation
Some Sanlam firstsSome Sanlam firsts
• Offshore asset swaps (1995)
• Structured products (1997)
• New generation, unitised, flexible savings; Stratus (2000)
• Endowment / RA payable anywhere in world (2001/2)
• Liquid offshore fund of hedge funds (2002)
• Tax & Forex Amnesty product (2003)
• 7 Year Guaranteed Endowment (2004)
Some innovations in the past yearSome innovations in the past year
• ALSI40 Highest level locker
• Highest monthly value locked in
• ALSI40 tracker over 6 year term
• Subject to cap over term of product (120%)
• Escalating guarantee investment
• Cliquet
• 5 Year term
• LEAD Fund of hedge funds
• South African hedge funds
Product StrategyProduct Strategy
PricePrice
Life Investment: Value for moneyLife Investment: Value for moneySingle premium investment, R250 000 in an equity fund. Term of 5Single premium investment, R250 000 in an equity fund. Term of 5 years.years.
Annual gross investment return of 11.50%Annual gross investment return of 11.50%
A marginal tax rate of 40% is assumed for the investorA marginal tax rate of 40% is assumed for the investor
Upfront commission of 3% is taken into account, with no trail feUpfront commission of 3% is taken into account, with no trail feeses
R352 279
R357 241
R367 332
Result of IRR
compounded
over 5 Years
7.1%7.9%LISP
7.4%8.6%Unit Trust
8.0%8.6%*Endowment
After TaxBefore
Tax
Internal Rate of
Return
* Shown for completeness –Endowment will always pay out an after tax value
Guaranteed Plan RatesGuaranteed Plan Rates
Product StrategyProduct Strategy
QualityQuality
Quality productsQuality products• Client focused
• Value for money
• Real benefits — integrity
• Benefit design appropriate to needs of client
• Examples
Matrix : Underwritten for life. No need to notify Sanlam if
• Change in occupation
• Part time activities
• Change from smoker to non-smoker
Funeral products. Premiums guaranteed for policy term
Stratus savings products. Focus on value for money
• Minimum premiums
• Transparency of charges
The road aheadThe road ahead
• Comprehensive product set — increase share of wallet:
Mortgages
Other
• Innovate regularly:
International products
Structured products, e.g. ALSI40 locker, Escalating guarantee
Risk product rider benefits
• Focus on core products:
Best of breed
Huge leveraging opportunity
• Package advice within product
Lifetime options
Sim.sense
Sanlam Life Operations
Hennie de Villiers
Sanlam Life OperationsSanlam Life Operations
HennieHennie de de VilliersVilliers
Operations’ GoalsOperations’ Goals
• To provide value for money to clients
• To be the service provider of choice for our clients and
intermediaries
• To retain existing business
• To grow administration profit
• To provide innovative needs driven IT & business solutions
• To create a success friendly environment
Key Focus AreasKey Focus Areas
Agility
Client CentricityClient Centricity Operational EfficiencyOperational Efficiency
Operations’ Goals
People & Culture
Client CentricityClient CentricityClient Centricity
ApproachApproach
• Market segmented approach
• Client and intermediary focus
• Multi-channel service with Call Centre as cornerstone
Service ChannelsService Channels
• Telephone • Letters
SERVICES
• Fax• Walk-in
• E-mail• WEB
CallCentre
MailCentre
Walk-inCentres
Client HelpOffices
Volumes Split by ChannelVolumes Split by Channel
53%39%
4% 4%
Telephone
Mail / fax
E-mail / web
Walk-in
Approach (2)Approach (2)
• Market segmented approach
• Client and intermediary focus
• Multi-channel service with Call Centre as cornerstone
• Differentiated service according to current & potential value
• Single client view
• Balance service and cost efficiency
• Focus on quality
Focus Going Forward…Focus Going Forward…
• Refine service models for entry-level & affluent market
• Expand service differentiation
• Consistent client experience
• Improve self-service abilities & usage
Operational EfficiencyOperational EfficiencyOperational Efficiency
ApproachApproach
• Manage unit costs
• Process focus
• Quality management
• Continuous productivity & efficiency improvement
• Operational innovation
• IT efficiency
Architecture
Cost-efficiency
Sourcing
Unit CostsUnit Costs
100
150
200
2001 2002 2003 2004
Year
Ran
d
Unit cost
Adj CPIX
Focus Going Forward…Focus Going Forward…
• Continue driving cost-efficiency
• Process management
• Operational innovation
• IT platform renewal & consolidation
AgilityAgilityAgility
Time to Market — LIMRA ComparisonTime to Market — LIMRA Comparison
Source: LIMRASource: LIMRA
Elapsed Time (Index)
0%
20%
40%
60%
80%
100%
120%
140%
160%
Size of change
Per
cent
age
Small
Medium
Major
ImplementationsImplementations
YearNew products &
major new enhancements
Medium enhancements
Small enhancements
New Funds
2003 5 16 13 6
2004 15 24 24 4
ApproachApproach
• Platform efficiency improvements
• Architecture
• Methodology improvements
• Measurement
• Flexible sourcing
Sanlam Individual Life Strategy
Lizé Lambrechts
Sanlam Individual Life StrategySanlam Individual Life Strategy
LizLizéé LambrechtsLambrechts
Issues Facing IndustryIssues Facing Industry
• Financial Sector Charter
• Black Economic Empowerment
• entry level market significance
• Changing Market Demographics
• Consumerism / Transparency
• Low inflation and interest rates
• Regulation and legislative change
• Consolidation
Issues Facing Industry (continue..)Issues Facing Industry (continue..)
• Accused of being intermediary centric
• Churning
• AIDS
• Pros/Cons of international expansion
• SA market mature?
• Poor service levels
• Slow response to new South Africa
• Products (costs)
Sanlam Life will therefore persist in moving its position as indicatedSanlam Life will therefore persist in moving its position as indicated
•
Proprietary
Collaborative
Product- focused Client- focusedSanlam
Old Mutual
Liberty
Momentum
Proprietary
Collaborative
Product- focused Client- focused
SanlamOld Mutual
Liberty
Momentum
Execution of the Strategy will be the Key DifferentiatorExecution of the Strategy will be the Key Differentiator
• Clear-cut goals for all business and support areas
• Complete alignment of all the business divisions and activities in
Sanlam Life
• Relentless, ongoing monitoring and measurement of results
• Decisive actions when targets are not met
• Ongoing environmental scanning to allow for rapid course correction
when needed
• Improving ability to react quickly to changes
What are our Goals and Aspirations?What are our Goals and Aspirations?
Grow shareholder value for Sanlam Ltd through
• Optimising returns
Return of (i + 10) on VIF measured by achievement of target
NUB EV, Operating profit and net positive cash flows
• Adding complementary new sources of profitable revenue
… which must return more than the hurdle rate
Where will we play?Where will we play?
We remain focused on the following broad markets locally
with selected international opportunities being reviewed on an
ongoing basis:
• Entry level (R2 500 < household income < R8 000)
• Middle market (R8 000 < household income < R30 000)
• Affluent market (R30 000 + household income)
• SME and SMME (entrepreneurs and small businesses)
• We exclude the mass markets
How will we win?How will we win?
•
Goals and Aspirations
Client centricity
Market segment
focus
New and alternative sources of
profit
• Outstanding execution
• High performance organisation and employer of choice
• Success friendly environment
• Cost management/operational effectiveness and efficiency
• Alliance and network management
• Brand awareness
Dominant
distribution
Issue : ABSA penetration
• relationship / service at regional level
• Data brokers and Business Bank
• Products
• Progress this year
Distribution actionsDistribution actions
Issue : Entry Level Market
• Expand SGS to 500 advisors
• Broker channel
• direct marketing
• Structural growth
• UB/BFS
Distribution actionsDistribution actions
Issue : Gauteng Market share
• BSO concept
• Develop black broker networks
• Gauteng Agency Initiative
• Rebuild Gauteng broker region
• Appoint black advisers
Distribution actionsDistribution actions
Issue : Low productivity
• Performance management
• Review incentives
• Sales support
• Remuneration more variable
• Manage as a business on transfer price basis
Distribution actionsDistribution actions
Issue : Affluent Market
• Innofin
• Citadel JV
• Product innovation
Distribution actionsDistribution actions
New and Alternative Sources of Profitable Revenue are being pursued on a broad frontNew and Alternative Sources of Profitable Revenue are being pursued on a broad front
• South African Market:
• Entry level market initiatives
• Sanlam Home Loans
• Industry consolidation
• Outsourcing
• IFS initiatives
• UK Market:
• MIA / future acquisitions
• TPA / BPO
