Financial Overview Heinie Werth

Transcription

1 Financial Overview Market and Product Philosophy Operations Distribution, Sanlam Life Strategy Heinie Werth Anton Gildenhuys Hennie de Villiers Lizé Lambrechts Financial Overview Heinie Werth

2 Key Results Individual Life R Million Half year Var03 Life new business APE % New business EV % New business EV margin 16% 13% - Net cash flow Life Non life Profit % Profit Analysis Individual Life R Million Half year Var03 Admin % Risk % Market related % Profit before tax % Admin cost ratio 36.1% 39.2% -

3 6 Year Trend Admin costs Individual Life R'm Actual 2000 base Recon of Cost Savings Life Group R Million Half year Total costs 2003* Add Inflation (5.4%) 55 Add MIA 37 Potential costs Less Net savings -121 Total costs 2004* estimated annual savings - effective annualised 300 * Costs = admin costs plus other sales remuneration

4 Cost Savings impact on Life Group NUBev 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 Sensitivity analysis 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) single (100m) Acquisition cost (10m) Maintenance cost (10m) 3.5

5 Market and Products Anton Gildenhuys Market 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)

6 Market segmented focus Market segmented teams responsible for: Aligning components Allocating resources to areas that will yield maximum result Product Strategy Price Innovation Quality

7 Product Strategy Innovation Some 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)

8 Some 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 Strategy Price

9 Life Investment: Value for money Single premium investment, R in an equity fund. Term of 5 years. Annual gross investment return of 11.50% A marginal tax rate of 40% is assumed for the investor Upfront commission of 3% is taken into account, with no trail fees es Internal Rate of Return Before Tax After Tax Result of IRR compounded over 5 Years Endowment 8.6%* 8.0% R Unit Trust 8.6% 7.4% R LISP 7.9% 7.1% R * Shown for completeness Endowment will always pay out an after tax value Guaranteed Plan Rates

10 Product Strategy Quality Quality 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

11 The 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

12 Operations 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 Areas Operations Goals Client Centricity Operational Efficiency Agility People & Culture

13 Client Centricity Approach Market segmented approach Client and intermediary focus Multi-channel service with Call Centre as cornerstone

14 Service Channels Mail Centre Call Centre Walk-in Centres Client Help Offices SERVICES Telephone Fax Walk-in Letters WEB Volumes Split by Channel 4% 4% 39% 53% Telephone Mail / fax / web Walk-in

15 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 Refine service models for entry-level & affluent market Expand service differentiation Consistent client experience Improve self-service abilities & usage

16 Operational Efficiency Approach Manage unit costs Process focus Quality management Continuous productivity & efficiency improvement Operational innovation IT efficiency Architecture Cost-efficiency Sourcing

17 Unit Costs 200 Rand Unit cost Adj CPIX Year Focus Going Forward Continue driving cost-efficiency Process management Operational innovation IT platform renewal & consolidation

18 Agility Time to Market LIMRA Comparison Elapsed Time (Index) 160% 140% 120% Percentage 100% 80% 60% 40% 20% 0% Small Medium Major Size of change Source: LIMRA

19 Implementations Year New products & major new enhancements Medium enhancements Small enhancements New Funds Approach Platform efficiency improvements Architecture Methodology improvements Measurement Flexible sourcing

20 Sanlam Individual Life Strategy Lizé Lambrechts Issues 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

21 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 indicated Collaborative Product- focused Liberty Sanlam Old Mutual Old Mutual Momentum Momentum Sanlam Client- focused Proprietary

22 Execution 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? 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

23 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 (R household income) SME and SMME (entrepreneurs and small businesses) We exclude the mass markets How will we win? Goals and Aspirations Client centricity Market segment focus Dominant distribution 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

24 Distribution actions Issue : ABSA penetration relationship / service at regional level Data brokers and Business Bank Products Progress this year Distribution actions Issue : Entry Level Market Expand SGS to 500 advisors Broker channel direct marketing Structural growth UB/BFS

25 Distribution actions Issue : Gauteng Market share BSO concept Develop black broker networks Gauteng Agency Initiative Rebuild Gauteng broker region Appoint black advisers Distribution actions Issue : Low productivity Performance management Review incentives Sales support Remuneration more variable Manage as a business on transfer price basis

26 Distribution actions Issue : Affluent Market Innofin Citadel JV Product innovation New 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