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Sanlam’s socio-economic impact in South Africa and beyond ...

THE BEGINNING 6A STRONG PLATFORM 10THE REALITY OF SOUTH AFRICA TODAY 14HOW SANLAM MAKES A CONTRIBUTION 18The role of life insurance 22A strong performer 24THE ROAD AHEAD 26A mindset challenge 28The regulatory environment 30THE SOUTH AFRICAN ADVANTAGE 32A DYNAMIC CONTEXT FOR SANLAM 38Investing in the Africa growth story 43Investing beyond Africa 48A TRUSTED PARTNER FOR THE FUTURE 52

... our South African journey Contents

Sanlam’s socio-economic impact in South Africa and beyond ... ... our South African journey 76

The beginning“To accomplish great things, we must not only act but also dream, not only plan, but also believe.” Anatole France

Sanlam’s socio-economic impact in South Africa and beyond ... ... our South African journey 98 ... our South African journey

The beginning

The dream on which it was founded remained at the core of how Sanlam approached its future. As a result, the com-pany was one of the first to unbundle its assets (others, such as Anglo American and SAB followed soon thereafter) – a process that led to the birth of some of South Africa’s strongest international players, including BHP Billiton and Sappi.

Sanlam’s unbundling process also led to the first major black economic empowerment (BEE) transaction in South Africa, with the sale of Metropolitan to a black-owned consortium in 1993. Ten years later, Sanlam completed the Ubuntu-Botho BEE transaction – once again remaining true to its dream by introducing a range of marginalised communities and entrepreneurs to shareholding and investment opportunities.

It was a natural step for Sanlam to demutualise and to list as a public company on the Johannesburg (JSE) and Namibian stock exchanges in 1998.

Today, the company employs more than 15 000 people. Despite having a global footprint, and continuously evolving its diverse financial services offering, the company in essence remains true to the principles of its dream and the South African journey that it has been on for nearly 100 years.

Sanlam’s South African journey started with a dream. A small group of visionaries had a dream about changing the destiny of their impoverished, marginalised and mostly rural community through collective savings. They founded Sanlam in 1918 – the beginning of a journey of change and empowerment in South Africa.

The principle was simple: small financial contributions from large groups of people could be utilised to empower individuals and encourage them to become economically active. Initially, the primary focus was on Afrikaners, but over more than 90 years most South Africans have become part of the Sanlam dream in some way.

From the 1930s, Sanlam expanded its focus beyond individuals to small businesses. The premiums collected from hundreds of thousands of people were invested into the development of an increasingly broad range of businesses. Sanlam was now not only changing the lives of its individual members, but was becoming a major influence in shaping the modern South African economy.

By the 1980s, Sanlam was investing in almost every key sector of the economy and was providing employment to nearly 450 000 people.

In the early 1990s, as our country began the process of reintegrating into the global economy, Sanlam reconsidered its role and impact in South Africa.

“Sanlam’s long history of empowerment, economic advancement, wealth creation and protection motivates us. This is a legacy and a responsibility that we take very seriously.” Dr Johan van Zyl, Group Chief Executive

A strong platformSouth Africa is ranked 3rd in the world in terms of financial market development.


A strong platform

financial products. In order to fulfil all those functions, the banking sector needs to be trustworthy and transparent, and – as has been made so clear recently – financial markets need appropriate regulation to protect investors and other actors in the economy at large.

South Africa’s high global ranking by the WEF is a strong vote of confidence in the efficiency and integrity of our financial system and capital markets. Sanlam has been a key role player in the development of this system, which today provides us with a solid platform to lead the way in wealth creation and protection in South Africa and beyond.

In order to fully appreciate the collective impact of Sanlam’s dream and subsequent role in the context of the South African economy, one has to understand the role of financial services in providing a platform for a strong and stable economy.

As South Africans, we do not often appreciate the fact that our financial sector is among the most stable and well-functioning in the world. So much so that in the World Economic Forum’s (WEF’s) most recent Global Competitiveness Report (2012–2013)1, South Africa is ranked 3rd in the world in terms of financial market development – which includes factors such as soundness of banks, regulation of the securities exchange, legal rights, financing through local equity markets, etc. In fact, South Africa ranks above every major developed economy in the world, and is only behind Hong Kong and Singapore.

The WEF highlights the critical significance of South Africa’s ranking:

An efficient financial sector allocates the resources saved by a nation’s citizens, as well as those entering the economy from abroad, to their most productive uses. It channels resources to those entrepreneurial or investment projects with the highest expected rates of return rather than to the politically connected. Business investment is also critical to productivity. Economies therefore require sophisticated financial markets that can make capital available for private-sector investment from sources such as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other

An efficient financial sector allocates the resources saved by a nation’s citizens, as well as those entering the economy from abroad, to their most productive uses.

The reality of South Africa today

“We must use time wisely and forever realise that the time is always ripe to do right.” Nelson Mandela


The reality of South Africa today

o Census 2011 found that over the past ten years, the average annual household income for all households in South Africa have more than doubled.

o The percentage of people attending an educational institution increased from 70,1% in 1996 to 73,5% in 2011.

o There was also a considerable increase in the percentage of persons who completed higher education – from 7,1% in 1996 to 11,8% in 2011.

Sanlam strongly believes that a good corporate citizen must continuously contribute towards our progress as a country, communities and individuals. In order to do so, we must be cognisant of the very real challenges facing South Africa. The Diagnostic Report from the government’s National Planning Commission identifies nine “central challenges”, which are summarised in the graphic on page 17, with unemployment and poor education identified as the most critical.

All nine challenges are important, and, as the Commission’s National Development Plan (NDP) states: Failure to address these challenges will result in a destructive cycle characterised by “economic decline, falling living standards, rising competition for resources and social tension”.

Significant progress has been made in South Africa since 1994. The economy has been very well managed, GDP growth has been sustained, and South Africa has made giant strides towards becoming a modern, diversified economy with the potential to compete in a dynamically shifting global economy. Economic growth has also translated into substantial improvements in the lives of many ordinary South Africans.

Consider our milestones

According to the results of the 2011 Census, there have been a number of improvements in the lives of South Africans since 1996:

o Households in formal houses have increased from 65,1% in 1996 to 77,6% in 2011.

o There has been significant increases in basic services such as the provision of water and electricity, and the removal of refuse

• Accesstopipedwater: from80,3%(1996)to 91,3% (2011)

• Accesstosanitation: from86,7%(2001)to 92,7% (2011)

• Accesstoelectricity: from58,2%(1996)to 84,7% (2011)

• Accesstoweekly from52,1%(1996)torefuse removal: 62,1% (2011)

Source: National Planning Commission

Eliminating poverty and reducing inequality are key strategic objectives2

Special patterns marginalise

the poor

Public service performance

is uneven

Divided communities

High disease burden

Poor educational outcomes

Crumbling infrastructure

Resource- intensive economy

Corruption

Too few South Africans are employed

Eliminating poverty

Reducing inequality

How Sanlam makes a contribution

By encouraging more and more people to be part of a business model that creates a virtuous cycle for all levels and segments of the economy, Sanlam continues to positively impact the lives of all South Africans.


How Sanlam makes a contributionSanlam’s contribution to South Africa’s ongoing economic development journey is evident in the following:

o Sanlam contributes 0,4% of South Africa’s GDP

o We provide direct employment to 13 139 people

o We invest some R14 billion annually (directly and indirectly) in various segments of the economy through the following payments:

• R6.1billionasremunerationandbenefitstoemployeesand directors

• R4billionasgovernmenttaxesandlevies

• R3.6billiontosuppliersandbusinesspartners

• R67million to local communitiesandcorporate socialinvestment projects

o Since 2003, Sanlam has injected more than R604 billion in the form of payments to policyholders, shareholder dividends and tax payments

o We have more than 507 000 shareholders (of whom more than 15% are ordinary South Africans)

o We add further economic value through our procurement of services and enterprise development initiatives.

Total amount distributed to policy holders (policy benefits, claims and reserve increases) (Rm)

Procurement of goods and services (Rm)

CSI and cause-related investments (Rm)Total tax contribution to fiscus (Rm)

3 500

4 000

3 000

2 500

2 000

1 500

1 000

500

0’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

60

70

50

40

30

20

10

0’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

3 500

4 000

3 000

2 500

2 000

1 500

1 000

500

0’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

Total income generated for shareholders (Rm)

4 500

4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

0’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12

80 000

90 000

100 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0


The role of life insurance“Sanlam helps ordinary South Africans to save and invest, to provide financial security for themselves and their families, and to grow their resources. We support economic growth and development by facilitating a culture of savings and investing in projects and enterprises that are building the future of our country.” Desmond Smith, Chairman of Sanlam Board

Beyond the value that Sanlam adds to the South African economy, it continues to positively impact the lives of ordinary South Africans through its business offering. At its core, Sanlam has a large, stable life insurance business. Life insurance is arguably the single most effective method through which individuals are able to save and invest effectively for the longer term. The regular nature of the payment of premiums helps ensure greater levels and stability of personal savings.

By providing life insurance and savings products which can be purchased in relatively small amounts on a regular basis, insurance companies are able to accumulate large amounts of money from across a large proportion of the population. By pooling these savings from many small investors into large accumulations of investable funds, insurance companies are able to then make large scale investments in a wide range of initiatives and enterprises that generate long-term returns for savers, but also benefit the broader economy.

The mechanism through which these investments are made is generally the capital market; and, in fact, investments serve as a stimulus to the health and growth of the capital market itself. Long-term savings generated by life insurance com-panies are also available for investment in infrastructure projects that will create new jobs and increase our economic capacity.

More companies on stock market and higher stock market prices

Premiums

Claims and policy settlements

Encourages greater demand for insurance

Investment on capital markets

Insurance saving and investment flows

Economic feedback flows

Available finance for

Insurancecompanies

National output (GDP) in the economy increases

More potential domestic consumption

Higher level of employment

Government to build up infrastructure

Private sector manufacturing, mining, services, enterprises, etc

to expand their business

Consumers buying insurance policies, especially

endowment policies

Insurance companies

Capital markets

Saving and investment as driver of economic growth

By encouraging more and more people to be part of a business model that creates a virtuous cycle for all levels and segments of the economy, Sanlam continues to positively impact the lives of all South Africans.


A strong performer

“I see the strong performance of the Sanlam share price as a vote of confidence by our shareholders in Sanlam management as an acknowledgement of Sanlam’s stable and consistent solid performance.” Desmond Smith, Chairman of Sanlam Board

Sanlam’s social and economic contribution is underpinned by the performance of the business itself. Over the past five years, Sanlam’s Group Equity Value has grown from R51 billion in 2007 to R63 billion in 2011 – which represents an impressive 24% growth. Similarly, our headline earnings grew from R4 833 million in 2007 to R5 015 million in 2011 – which represents a strong performance given the global economic meltdown over this period.

300

250

200

150

100

50

18,0%

16,0%

14,0%

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%Dec•05 Dec•06 Dec•07 Dec•08 Dec•09 Dec•10 Dec•11 Dec•12

SLM Life Alsi Fini Banks SLM (CAGR) Life (CAGR)

Sanlam share performance3

Contribution to group net operating profit (Rm)4

Other international 1%

Other international 4%

Namibia 2%

Namibia 2%Botswana 8%Namibia 5%SA Entry level 6%

SA Traditional 97% SA Traditional 75%

2003R2 452m

2012R6 452m

The road ahead“The National Development Plan is an opportunity to remake the future, to re-energise our people to strive for a future that is worthy of our proud history, built in the vision of our Constitution. The National Development Plan is a call to action to unite as a country, to unleash the energies of our people to build a better future.” Trevor Manual


The road ahead

While we look back on South Africa’s progress and Sanlam’s own history of contribution with pride, it is important that we continue building on that rich legacy for future generations. Sanlam must remain relevant within a dramatically changing South African and global environment. Our relevance is tested, for example, by our ability to transform our business in line with the imperatives of black economic empowerment, to serve the underserved market that currently does not have easy access to financial services, and to ensure that we continue growing our business and adding value to our key stakeholders.

A mindset challenge

From Sanlam’s perspective, the National Development Plan (NDP) provides a bold vision and plan of South Africa’s future. The plan says that we all need to work together actively – government, business, communities – to build the kind of society we want for our children and grandchildren; a society in which poverty has been eliminated, inequality reduced, and we are all focused on a positive future rather than the negative past.

We fully subscribe to the objectives and the broad framework that has been outlined by the National Planning Commission, while continuing to engage with government and other key stakeholders on the specific details.

Given the urgency of the NDP, harnessing the private sector as a partner is critical to meet job creation and educational priorities. As such, greater attention will have to be given to the regulatory and structural challenges of our economy, including the labour market, which is, we would argue, one factor that has not been adequately addressed in the NDP.

As we look forward, we have no doubt that South Africa has, as the foreword to the NDP puts it, the means, goodwill, people and resources to eliminate poverty and reduce inequality. What we do not yet have, however, is the right mindset. Too often, as South Africans, we focus on the negative; what we do not have; where we fall short. We compare South Africa to developed economies in North America and Europe, and we despair at how far we still have to go.

While many South Africans will bemoan the challenges we face and the distance we still have to travel, not enough of us pause to reflect on the victories we have achieved and the distance we have already travelled. We need a mindset that places greater emphasis on what is positive about South Africa, so that we start believing in ourselves and in our ability to overcome whatever challenges lie ahead.

We fully subscribe to the objectives and the broad framework that has been outlined by the National Planning Commission, while continuing to engage with government and other key stakeholders on the specific details.


The regulatory environment

Going forward we are also facing a drive towards a far more restrictive regulatory environment that is fundamentally impacting our industry and business. The current drive towards reforming financial regulation has its origin in the global financial crisis. The severity of the crisis has unfortunately created a favourable climate for the justification of a heavy- handed approach to regulation and there is a significant risk that the pendulum will swing too far towards overregulation.

In the quest for a balance being struck between the requirement of financial stability and promoting a dynamic financial sector that plays a key role in economic development and growth, the post-crisis environment is understandably favouring stability.

Sanlam understands and supports the rationale for regulatory reforms and has always made every effort to contribute towards a safer financial sector. We engage with government through industry associations, provide input into proposed regulatory reforms and will continue to support an effective regulatory environment.

However, we believe that while there is a need for strong enforcement of regulatory measures, the principles of effective regulation do not require or authorise regulatory authorities to exercise their functions in a way that would be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the South African economy in the medium or long term.

A key principle to observe in regulatory reforms is proportionality. Proportionality implies that we should be clear on what is “fit for purpose” regulation. The regulator must tailor its actions to the specific characteristics of the market or sector being regulated. At present, it seems too much as if so-called “first world” regulations are being recycled without taking into account the significant differences in emerging markets or entry-level markets (not the irony that the global economic crisis had its roots in those same first-world markets).

While we look back on South Africa’s progress and Sanlam’s own history of contribution with pride, it is important that we continue building on that rich legacy for future generations. Sanlam must remain relevant within a dramatically changing South African and global environment. Our relevance is tested, for example, by our ability to transform our business in line with the imperatives of BEE, to serve the underserved market that currently does not have easy access to financial services, and to ensure that we continue growing our business and adding value to our key stakeholders.

Sanlam understands and supports the rationale for regulatory reforms and has always made every effort to contribute towards a safer financial sector.

The South African advantage “The only real voyage of discovery consists not in seeing new landscapes, but in having new eyes.” Marcel Proust


The South African advantage

To realise our true potential as a nation, our collective mindset needs to be informed by a global perspective. South Africa is tightly integrated into the global economy and in global competition for the capital and resources needed to drive the kind of economic growth required to have a substantial developmental impact.

In the context of the global economy, we recognise that the world is transforming, with growth and capital flows shifting significantly from west to east and north to south. While growth prospects in most developed markets will remain fragile, global growth will be driven by the dynamic growth markets. Ernst & Young has identified a portfolio of 25 growth markets that they believe will be key to global growth for the foreseeable future – accounting for approximately 50% of global GDP by 2020.

Source: EY Rapid Growth Markets Forecast

Russia

China

India

Brazil

Argentina

Chile

Colombia

Mexico

NigeriaGhana

Egypt

Turkey

Poland

South Africa

SaudiArabia

QatarUAE

CzechRepublic

UkraineKazakhstan

Korea

Vietnam

Thailand

Indonesia

Malaysia

Rapid growth markets5


This global perspective requires for South Africans to recognise and celebrate the fact that our country is an emerging market or “dynamic growth market”. We are in the company of emerging market countries such as Brazil, Russia, Indian, China, Mexico, Indonesia, Malaysia, Thailand, Turkey, Nigeria, Egypt, Argentina and Poland – against which we compare favourably across a range of indicators and indices.

The size of South Africa’s economy positions it among the top 30 in the world. It is the 10th largest dynamic growth market, only behind the other BRIC countries, Mexico, Indonesia, Poland, Turkey, and Saudi Arabia. Similarly, its population size is among the 30 largest in the world, and projected economic growth rates for the period from 2005 to 2015 put it in the same category as the likes of Poland, Turkey, Brazil, Mexico, Malaysia and Thailand.

On several other key measures of general attractiveness though, South Africa stands out among the very best dynamic growth markets. In terms of the business environment, for example, South Africa ranks 39th (out of 185 countries) in the World Bank’s Ease of Doing Business Index (June 2012). This puts us ahead of almost every other significant dynamic growth market, and significantly ahead of any of the other BRICs, as well as countries such as Spain, Italy, the UAE and Turkey.

The quality of our business environment is partly a factor of our financial and capital market infrastructure, which rates among the best in the world. To illustrate this point – and besides the overall WEF ranking1 of 3rd in the world in terms of financial market development – South Africa is 1st in the world for the regulation of its securities exchange, efficiencies of corporate boards, legal rights index, as well as the strength of auditing and reporting standards, 2nd for the soundness of banks and

for the protection of minority shareholder interests, 3rd for the ability to raise finance through local equity markets and 10th for investor protection.

The quality of our political environment is also an important factor. Again, while South Africans themselves can be quite critical, several objective rankings place South Africa among the very top dynamic growth markets in terms of the quality of our democratic processes and institutions. According to the Polity project, a widely respected categorisation of “regime type”, South Africa scores a +9 (on a 21-point scale from -10 to +10), placing it among the top quartile of countries in the world. Similarly, on the Economist Intelligence Unit’s Democratic Freedom Index, South Africa ranks 30th (out of 167 countries), ahead of the likes of France, Poland, Mexico, Indonesia, Malaysia, Turkey and all the BRIC countries.

Corruption is a very real challenge for us in South Africa, and our ranking of 64th in the world on Transparency International’s Corruption Perception Index certainly needs improving. However, once again, we are ranked well ahead of any of the other BRIC economies (as well as Italy, Greece, Indonesia, Argentina, Vietnam and the Philippines).

Objectively speaking, South Africa’s attractiveness in a global and dynamic market context should be unquestionable, and becomes all the more compelling when positioned relative to the growth story of the rest of the African continent; while South Africa itself offers an attractive investment proposition, it also provides an attractive and stable platform from which to invest and do business in other parts of the continent. In the context of changing global dynamics and the shift in capital flows towards emerging markets, we believe that a South Africa that is purposely integrated and provides a stepping stone into the rest of Africa could genuinely rival the BRICs in the imagination of international investors.

Ranking Ranked ahead of

GDP (IMF) 26 (/181) Greece, Denmark, Finland, Ireland, Portugal, Hungary, Czech Republic, UAE, Malaysia, Thailand, Argentina

Ease of doing business (WB) 35 (/183) Spain, Italy, the UAE, all the BRIC and CIVET countries

Democratic freedom (EIU) 31 (/167) France, Poland, Mexico, Indonesia, Malaysia, all the BRIC and CIVET countries

Corruption perception (TI) 69 (/176) China, Brazil, India, Russia, Mexico, Indonesia, Thailand, Argentina, Vietnam, Italy, Greece

Financial market development (WEF) 3 (/139) France, UK, US, Germany, Japan, all the BRIC and CIVET countries

M&A Maturity Index (EY) 49 (/175) Mexico, Greece, Brazil, Russia, India and all CIVET countries

South Africa: Blue-chip investment destination

A dynamic context for Sanlam “At a dark time for the world economy, Africa’s progress is a reminder of the transformative promise of growth.” The Economist, The Hopeful Continent


A dynamic context for SanlamIn the context of a changing global economic order, we are critically re-evaluating the role that Sanlam could and should be playing, not only in South Africa but also beyond; in terms of discovering new growth and development opportunities, bringing learnings from other markets back to South Africa, and helping to shape a financial services agenda that makes sense in a dynamic growth markets context. As a result, we are steadily growing both our footprint and range of services, with a particular focus on the high-potential growth markets in the rest of Africa and Southeast Asia.

South Africa, through its inclusion in the G20, IBSA and BRICS forums, as well as achieving the impressive 3rd ranking in the WEF1 financial market development pillar and a score of 5.72n Financial Market Development, has a significant role to play to partner, learn and empower, thereby leveraging the South African business experience and financial technical expertise. This should facilitate the definition of a new framework for financial regulation in these dynamic growth market economies versus the flat-to-recessionary economic environment of the developed markets.

The developed markets (USA/Eurozone) continue to battle through the financial crisis and the corresponding tidal wave of regulation to manage the outfall as well as manage an economic zone that will continue to showcase low to negligible growth in the near future. The onus is therefore on the dynamic growth markets to create a business environment and regulation that is fit to support the growth agenda from these markets.

In light of the WEF financial markets ranking and the G20/BRIC drive, the dynamic growth markets can play a “role in advancing the restructuring of the global political, economic and financial architecture into one that is more equitable and balanced”.

We believe that Sanlam as a leading financial services company can play a significant role in enabling South Africa to strengthen its position amongst the peer group. Our company growth strategy is tightly aligned to this.

AFRICA & SUSTAINABLE ENERGY AFRICA: Understand entry-level market distribution challenges in servicing rural and urban communities through delivering affordable financial services and ease of access.

EMPOWER

LEARN

PARTNER

SANLAMAFRICA & SUSTAINABLE ENERGY AFRICA: Technical expertise, product sophistication, availability of suite of products and services. Delivering comprehensive financial services to fast-growing affluent and wealth market segments.

G20 AND BRIC/IBSA: Drive the debate and policy framework development in establishing financial services regulation that is fit for dynamic growth markets through the partnerships in Africa and Southeast Asia on key pillars: regulation of securities exchange, soundness of financial institutions, financing through local equity markets and availability of financial services.


Investing in the Africa growth story

“At a dark time for the world economy, Africa’s progress is a reminder of the transformative promise of growth.” The Economist, The Hopeful Continent

For us, the story of dynamic growth markets begins in Africa. In a global context in which emerging and rapid growth markets are dominating capital flows and investor attention, the African growth story is difficult to ignore.

While most developed economies continue to struggle, a diverse group of African economies, including Nigeria, Ghana, Ethiopia, Tanzania, Mozambique and Zambia, are among the fastest growing in the world, with GDP growth of 7%+ over a sustained period. In fact, the economic output of the African continent has more than tripled over the past decade. With progress being made on many fronts – not only economic but also political and social – Africa has become an extremely attractive growth market.

GDP growth, unweighted annual average, %

* Excluding countries with less than 10m population as well as Iraq and

Afghanistan

6

5

4

3

2

Asian countries

African countries

1970s 1980s 1990s 2000s 2011–15

World’s ten fastest-growing economies Annual average GDP growth, %7

2001 – 2010 2011 – 2015

Angola 11,1 China 9,5

China 10,5 India 8,2

Myanmar 10,3 Ethiopia 8,1

Nigeria 8,9 Mozambique 7,7

Ethiopia 8,4 Tanzania 7,2

Kazakhstan 8,2 Vietnam 7,2

Chad 7,9 Congo 7,0

Mozambique 7,9 Ghana 7,0

Cambodia 7,7 Zambia 6,9

Rwanda 7,6 Nigeria 6,8

Our current, immediate and future footprint6

Rest of Africa

RSA based

Developed markets

South-East Asia


Growth of Top 10 investors into Africa (excluding RSA)8

Source: fDi Intelligence; Ernst & Young

CAGR (2007–2011) 2011 YoY change

80%

60%

40%

20%

0%

-20%

-40%

100%

120%

30,1%

64,8%

France US UK India UAE Spain Portugal Canada China & HK SouthAfrica

43,6%

23,7%

0,9%

-4,6%-0,8%

8,2%

27,8%

6,1%

Sanlam’s strategy to grow into the rest of Africa is not only about a substantial growth opportunity. In the same way that we played a role in shaping South Africa’s best-in-class financial services sector, we can play a supporting role in other parts of the continent. By leveraging our technical expertise we can help embed strong financial institutions and systems, thereby creating infrastructure that will enable long-term savings and investment in socio-economic growth and development.


Increasing contribution from growth markets

Country Life assurance Short-term insurance

Asset management Credit Other*

Ghana

Kenya

Malawi

Mozambique

Nigeria

Rwanda

South Sudan

Swaziland

Tanzania

The Gambia

Uganda

Zambia

Note: Sanlam has indirect interests in countries such as Rwanda. In these cases Margaret does not have direct responsibility for the business.* Consists of medical, funeral services, employee benefts, etc.

Sanlam in Africa9

Other international

Rest of Africa

Botswana

Namibia

SA entry level

SA traditional

Other international

Rest of Africa

Botswana

Namibia

SA entry level

SA traditional

New life business volumes — 2011 Gross value of new business — 2011

Direct interestIndirect presence via associate company


Investing beyond Africa

The financial services industries in dynamic growth markets are increasingly the focus of investors. They have recognised the saturation of developed markets in contrast to the high growth potential in dynamic growth markets. Emerging markets are, for example, home to over 80% of the world’s population, producing almost 25% of global GDP (and growing at a 10-year average of over 5%), but only account for about 11% of life insurance premiums. This clearly implies huge potential.

The global recession has underlined the contrast between the relative growth performance of the Life sector (as an indicator of broader financial services) in developed and dynamic growth markets respectively. Swiss Re’s Sigma research reveals that overall global Life sector premiums have been dropping since 2008 (driven by substantial drops in the US and UK). However, over the same period, Life premiums in most dynamic growth markets continued to grow. Overall life premiums (as an indicator of broader growth in financial services) are growing faster than GDP in dynamic growth markets, particularly in those markets with rising GDP per capita.

Asia is leading the way among dynamic growth markets, with by far the biggest proportion of the financial services and specifically total Life market across all dynamic growth markets (accounting for almost 75% of total Life premiums). Life premiums have also been growing through most of the 2000s at an average rate close to 20%. Among the important contributors are relatively high life expectancy, the modest scale of public retirement schemes and, critically important, high savings rates.

Besides Africa, we believe that the markets in Southeast Asia offer Sanlam a particularly attractive opportunity to continue our long-term growth story off the platform of a strong and stable South African market. Equally importantly, it provides Sanlam, as a leading financial services company in South Africa, with an opportunity to play a significant role in enabling our country to strengthen its position as a leader amongst its peer group of dynamic growth markets.

Share of emerging market regions12

120%

100%

80%

60%

40%

20%

0%Population GDP US 36 Non-life

premiums USD 1

Life premiums

USD 1

Middle East Africa Eastern Europe

Latin America Asia

Industrialised countries Emerging markets

120%

100%

80%

60%

40%

20%

0%Population GDP US 36 Non-life

premiums USD 1

Life premiums

USD 1

Emerging markets versus industrialised countries11

Real premium growth10

20%

15%

10%

5%

0%

Life Non-life

n Growth rate 2011

● Annual average growth rate 2001—2010


In our view, India in particular stands out as a growth market for Sanlam, certainly for its long-term growth potential and the technical skills and experience from a South African environment that are directly applicable in the Indian context. In addition to Sanlam’s role as a technical partner of choice,

and South Africa’s financial sector maturity, there are many innovations being implemented in the “bottom of the pyramid” of India’s emerging market that we can learn from and potentially apply to South Africa and other parts of the African continent.

CountryGDP($bn)

Total employed(million)

Top 20%per capita

($)

Grosssavings pool

($bn)

GDP growth2000–09

(%)

Populationgrowth pa

2009–15(%)

Urbanisation(% of

total pop)

South Africa 295 14 18 782 44 4.1 0.6 61

China 4 909 750 8 811 2 651 10.9 0.6 44

India 1 236 426 2 423 433 7.9 1.3 30

Indonesia 539 106 5 265 124 5.3 1.2 53

Malaysia 192 12 17 931 55 5.1 1.5 71

Nigeria 173 48 2 718 31 6.6 2.4 49

Kenya 33 18 2 177 5 4.4 2.6 22

Tanzania 22 20 1 143 5 7.1 2.9 26

Uganda 16 13 1 217 3 7.8 3.2 13

Ghana 16 10 1 573 3 5.8 1.8 51

Zambia 13 5 2 781 3 5.4 2.4 36

Botswana 12 1 19 842 2 4.4 1.3 60

Namibia 10 1 16 906 3 5.3 1.7 37

Malawi 5 6 698 1 4.8 2.7 19

Growth opportunities in dynamic growth markets13

Besides Africa, we believe that the markets in Southeast Asia offer Sanlam a particularly attractive opportunity to continue our long-term growth story off the platform of a strong and stable South African market.

A trusted partner for the future

At Sanlam we have built solid foundations over nearly 100 years from which to let our business and socio-economic contributions grow.


A trusted partner for the futureSouth Africa is at a critical point in its history. The past two decades have seen substantial progress in the South African economy, raising the average quality of life for most South Africans. However, after such a short time of participating in global markets, the global economic crisis poses a number of additional challenges which we will have to overcome to realise our true potential as a nation.

Sanlam’s track record as a contributor to our economy and broader society places it in good stead to continue playing a role in the South African economic journey. We believe that as a trusted partner, Sanlam can help address our socio-economic challenges going forward. We intend to retain our trusted partner status by exceeding the market in our current offerings, which includes:

o providing all South Africans with the means to save, grow and protect their wealth and assets;

o reinvesting savings in the development of our economy;

o generating returns for policyholders and shareholders alike;

o contributing substantial amounts to the South African fiscus; and

o investing strategically in social initiatives.

However, we recognise that South Africa is gaining status as a “blue-chip dynamic growth market” in a changing global economic order. Therefore, we intend to learn from and contribute to other dynamic growth markets by actively pursuing new growth areas.

At Sanlam we have built solid foundations over nearly 100 years from which to let our business and socio-economic contributions grow. We will achieve this by implementing growth-specific strategies in dynamic markets in South Africa, the rest of Africa and India, while never losing sight of our empowerment, economic advancement and wealth creation and protection strategies.

1 World Economic Forum's Global Competitiveness Report (2012–2013)

2 National Planning Commission

3 I-Net Bridge, 10/5/2012

4 Investment Case 2011 Annual Results Roadshow

5 EY Rapid Growth Markets Forecast

6 Sanlam Emerging Markets Investors Conference 2011

7 The Economic, IMF April 2012

8 fDi Intelligence, Ernst & Young

9 Sanlam in Africa

10 Swiss Re

11 Swiss Re

12 Swiss Re

13 Sanlam Emerging Markets Investors Conference 2011

End notes

Sanlam’s track record as a contributor to our economy and broader society places it in good stead to continue playing a role in the South African economic journey.

Contact details

If you have any queries or comments about this report, please contact

Head of Group CommunicationAinsley [email protected]+27 21 947 2490

www.sanlam.co.za LICENSED FINANCIAL SERVICES PROVIDER

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