UBS GLOBAL INSURANCE CONFERENCE Growth Prospects in Emerging Markets - PowerPoint PPT Presentation

UBS GLOBAL INSURANCE CONFERENCE Growth Prospects in Emerging Markets Sanlam (CEO – Johan van Zyl) : June 2009

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 & Outlook

GROUP OVERVIEW Our 91-year History

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

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 a wide range of client-centric solutions in retail and institutional markets in both South Africa and other targeted countries

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 131) mill R 439m New bus volumes: New bus volumes: New bus volumes: R12,165m R36,014m R51,957m

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 Client Portfolios • Private Equity • Stock-broking • Niche debt and equity financial • Short-term insurance engineering solutions • General Loans • Short-term insurance • Health Administration • Hedge Funds (International)

Current Geographical Footprint Current

“LIFE” IN SA Striking Parallels between Developed Market Economies

High Penetration Rate in SA Life Penetration (%GDP) 16 UK 14 South Africa 12 10 South Korea 8 France Japan 6 Europe Asia North America World Italy 4 Oceania PR China Germany Africa Brazil 2 Mexico Latin Am. & Caribbean Venezuela 0 1000 10000 100000 GDP per Capita (log scale) Source: Swiss Re, Sigma No. 3/2008

Highly Concentrated Market in SA Market share of SA retail single new Market share of SA retail recurring business premiums new business premiums Sanlam Remainder Remainder Sanlam 15% 10% 20% 22% Discovery 9% Discovery 0% Momentum Momentum Old Mutual 11% 13% 23% Old Mutual 17% Metropolitan Metropolitan 6% 7% Liberty Liberty 24% 23%

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 financial services firms • Sizeable portion of SA “life insurance” is management of existing assets and drawdown / annuity products • The ratio of retirement assets to GDP is running at around 80% which is comparable with developed countries where private sector pension plans or private pensions play a key role

STRATEGY & GROWTH OPPORTUNITIES A Sanlam Case Study Finding Growth in a Mature Market

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 and evolve • Bancassurance: A successful network, however its enviable position could still be shaken by market forces • Searching for future growth, with a spotlight on developing markets • Regulatory pressures, driven by increased consumerism • Transformation (SA trend only)

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-distribution initiatives • Improving overall efficiencies: o Diversifying the total service portfolio to reduce risk o Cost focus o Capital efficiency focus • Transformation and People

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

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

NEW GROWTH OPPORTUNITIES i) Tapping into Existing Client Base (Mass Affluent Market) Consumerism & Increasing Share of Wallet

Listening to What our Clients Want Client Centricity Integrated services & a shift from product towards needs-orientated perspective

Changing Consumer Demands Example of Flows Moving Off-Balance Sheet Development of SA savings industry: Total new business flows 600 600 2.4 2.11 1.87 500 500 2.0 1.79 1.77 1.65 400 400 1.6 times Rbn 300 300 1.2 1.01 0.87 0.79 0.75 0.74 200 200 0.8 0.63 0.44 100 100 0.4 0 0.0 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008* 2008* Mutual Funds Life insurance - Premiums received Mutual Funds vs Life (%) Source: SARB *Note: Life sales on an annualised basis for 9-months ended Sept-08

Sanlam Adapting to Changing Demands Building Capacity to Exploit New Trends Grow alternative revenue sources: Sanlam Group New business flows 100 100 5.0 4.67 4.55 4.48 CAGR 2002-2008 (+22%) 4.04 4.48 90 90 83 83 82 82 4.0 80 80 2.91 66 66 70 70 3.0 60 60 51 51 times Rbn 50 50 2.0 1.47 43 43 40 40 1.0 27 27 30 30 18 18 19 19 18 18 20 20 14 14 13 13 0.0 11 11 11 11 9 10 10 0 -1.0 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Life Non-life Ratio of non-life to life

Divestment from Absa, allows Sanlam to operate directly in Education these banking-related provision Savings Retire- markets & Invest- ment ment Wealth Management Risk Home cover loan Personal Cover Car & Retail house Medical Clients hold Life- cover style Banking/ Wills & Trans- trusts actional Medium Financial term Education credit Short- term

SIM SPI SCM SCI SSS Capital Markets Traditional IM: SMMI SA Simeka Cpt & Ldn SIM SEB EM Risk Institutional Traditional IM: incl Nam Employee Clients International Benefits SUS SAMI Sanlam Specialist: Specialist: SA Coris Proper- International ties Blue Octane Ink SIM SPE Global

Cross Pollination Opportunities Creating the Ability to Cross-sell within the Group Traditional life assurance Short-term Investment insurance management Other financial services

Cross Pollination Opportunities (continued…) Untapped Opportunities within the Group Cross-sell Potential at SPF: Clients with a single provider (% untapped) 1.8 100% 90% 1.6 SPF‟s life clients have the largest 77% untapped potential of 1.3m clients 80% 1.4 70% 1.2 55% 60% 52% 1.0 million 45% 50% 0.8 37% 40% 30% 0.6 30% 0.4 20% 0.2 10% 0.0 0% SPF (Life only) SCI Santam Wills Glacier SHL No. of total clients - lhs % of clients with only 1 product (ie untapped potential) - rhs

NEW GROWTH OPPORTUNITIES ii) Tapping into New Markets (Lower-income Markets) SA, Rest of Africa & India

a) Growth Opportunities in South Africa Entry-level Market (ELM) and Black Diamonds

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 Affluent Middle- 1% 1% income 12% 12% ELM 87% 87%

Growth Potential – Size of RSA ELM Too poor Has funeral/ 4,9m burial insurance 5,2m (30%) No regular income No Access 5,4m Total Market 10,3m 18m No need Does not have 0,4m 12,8m (70%) Has Access Potential 2,5m 2,1m

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 Institute