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95INTEGRATED REPORT 2019

CLUSTER REPORT: SANLAM EMERGING MARKETS

R2 632 millionNet result from

financial services (2018: R2 038 million)

27%Contribution to Group net

result from financial services (2018: 23%)

4 920Number of employees

(subsidiaries) (2018: 4 730)

SEM

About SEMThe SEM cluster is responsible for Sanlam’s business services (life insurance, general insurance, health, retail credit, asset management and specialist general insurance offerings) in emerging markets, outside South Africa. SEM leverages its expertise and experience at a cluster level to provide a wide range of support services and resources to its in-country operations, which in turn provide clients with innovative financial solutions. Additional capacity and technical expertise are sourced from Santam, SPF and SIG as necessary.

SEM contributed 27% to the Group net result from financial services and 28% to GEV, making it the second largest cluster in the Group.

Strategic intent: to be a leading Pan-African financial services group, complemented by a meaningful presence in India, Malaysia and Lebanon

Leading

• Market development

• Governance and ethics

• Thought leadership

Pan-African footprint

• Strong local businesses

• Comprehensive and relevant footprint

Go-to partner

• Multinationals

• Other strategic alliances

Client centricity

• Relevant brand and products meeting client needs

People

• Employer of choice

• Employ the best talent

• High performance culture

96 SANLAM

CLUSTER REPORT: SANLAM EMERGING MARKETS (continued)

SEM at a glance

SEM’s key focus is to leverage its expanded footprint through profitable organic growth of its existing businesses, focusing on key markets. Our unmatched Pan-African footprint provides a unique opportunity to be the go-to partner for multinational corporate clients and intermediaries, and to enter into strategic alliances with other distribution partners. This is augmented by strong local businesses and an in-country retail and corporate focus that enables us to provide a complete suite of products for all clients in different markets. The SEM group office provides in-country business partners with expanded central support capabilities to execute initiatives. This is underpinned by a strong focus on delivery and fostering a high-performance culture.

Increased regulatory capital requirements in some markets may lead to market consolidation and we will continue to pursue structural growth opportunities as these arise. To enhance our footprint, the short-term focus for Ethiopia and Egypt is to partner with a local company as a product and technical skills provider, which could result in equity shareholding. However, the latter is not an immediate priority.

With a range of existing products

Life insurance General insurance

Health Reinsurance

Specialist Insurance Specialist Insurance

Assistance businesses Asset management

Retail credit To the following clients

Retail Commercial

Institutional Corporate

SEM consists of the following entities

SEM Group Office SPA Life Insurance SPA General Insurance Middle East/Asia

Functional support teams, based in Cape Town, Johannesburg and Casablanca – including:

• finance and reporting

• risk & compliance

• operations & IT

• HR

• corporate services

• mergers & acquisitions

23 life insurance businesses in 23 countries (20 subsidiaries and 3 associates) – including:

• 4 asset managers

• 2 retail credit businesses

26 general insurance businesses in 26 countries (22 subsidiaries and 4 associates) – including:

• 18 assistance businesses

• 15 health businesses

• 8 reinsurance operations)

7 businesses in 3 countries (2 subsidiaries and 5 associates) – comprising:

• 2 life insurers

• 2 general insurers

• 1 composite insurer

• 2 retail credit businesses)

Which serve the following countries

Sanlam Pan-Africa Sanlam ME/Asia

7 countries(Southern Africa)

5 countries(East Africa)

2 countries(Anglophone West Africa)

18 countries(Francophone North

and West Africa)

3 countries(Lebanon, India and Malaysia)

Through our distribution partners

Brokers Bancassurance Telcos

Tied agents Direct Aggregators

97INTEGRATED REPORT 2019

04OUR 2019 PERFORMANCE

An overview of SEM’s operating model

SEM underwent a major transformation following the acquisition of the remaining 53% stake in Saham in October 2018. This included the ongoing onboarding of the Saham businesses in the short term as well as facilitating the transition to a new operating model. Sanlam Pan Africa (SPA) was established as a sub-cluster to create focus on our African operations, comprising two vertical lines of business: a general insurance line, which includes health and assistance, and a life insurance line, which includes asset management and retail credit. The Other International sub-cluster comprises our India, Lebanon and Malaysian businesses. Both sub-clusters are supported by a reconfigured SEM Group Office to remove unnecessary duplication of support functions.

Implemented in 2019, this operating model enables SEM to manage the complexities of the African and other international businesses and its widespread operating base. Importantly, it enables us to optimise capital allocation and enhance operational efficiency, which is critical if we are to meet the required returns on investment.

To grow the specialist general insurance lines in Africa, we partner with Santam who provides expertise and technical support. Good progress was made to bed down effective reporting structures and systems for collaboration between Santam specialist businesses and SPA GI.

We will continue to support all our businesses in the various markets. However, given the geographic diversity as well as market maturity and growth potential, we have identified 10 countries within our portfolio that will receive prioritised focus. In Africa these countries include Morocco, Côte d’Ivoire, Nigeria, Kenya, Angola, Botswana, Namibia and Mauritius (focusing on reinsurance and specialist businesses, Saham Re and Continental Re). In the Middle East and Asia, India and Lebanon (due to its relative market size) will be our priority markets.

Sanlam Emerging Markets (SEM)

Human resources

Sanlam Pan Africa (SPA)Other international

Sanlam Middle East and Asia (SME/A)Finance/actuarial

Operations/IT

Governance, risk and compliance

SPA Life SPA GI India Malaysia Lebanon

Corporate affairs

Multinational corporations and strategic alliancesMergers and acquisitions

SEM is a complex cluster with great opportunities as well as challenges, which means we need to prioritise and focus on those aspects of the business where value can be extracted.

98 SANLAM

CLUSTER REPORT: SANLAM EMERGING MARKETS (continued)

Our business presence in emerging markets

Lebanon

Tunisia

Algeria

Morocco

Niger

Mali

Senegal

Guinea

Burkina Faso

Côte d’Ivoire

Ghana

Togo

Benin

Nigeria

Côte d’Ivoire

Cameroon

Gabon

Republic of Congo

Angola

Botswana

Namibia

A key focus is on driving profitable organic growth of our in-country businesses. However, an additional opportunity to grow our general and life insurance portfolios is leveraging our footprint to offer a one-stop service to multinational companies, brokers and insurers. In particular, strategic alliances with bancassurance partners, telecommunication companies and aggregators offer strong distribution channels across the continent.

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99INTEGRATED REPORT 2019

LEVEL 1

Kenya

Saudi Arabia

India

Direct presence

Indirect presence

Life insurance licence ü

General insurance licence ü

Health offering ü

Other licences ü

Philippines

Malaysia

Uganda

Rwanda

Burundi

Tanzania

Malawi

Zambia

Mozambique

Madagascar

Mauritius

Zimbabwe

eSwatini

South Africa

Lesotho

100 SANLAM

CLUSTER REPORT: SANLAM EMERGING MARKETS (continued)

The SEM opportunity Africa’s economic, technological and infrastructural growth potential presents a significant business opportunity. Importantly, GDP growth in most of the African countries where we operate exceeded that of South Africa in the last five years. Many also outperform developed and other emerging markets in the rest of the world.

Ang

ola

eSw

anti

ni

Nam

ibia

Leso

tho

Nig

eria

Gab

on

Co

ngo

Alg

eria

Tuni

sia

Mo

rocc

o

Mo

zam

biq

ue

Mal

awi

Cam

ero

on

Zam

bia

Mau

riti

us

Bo

tsw

ana

Tog

o

Mal

i

Mad

agas

car

Nig

er

Gam

bia

Ken

ya

Gui

nea

Ben

in

Gha

na

Tanz

ania

Bur

kina

Fas

o

Sen

egal

Rw

and

a

Cô

te d

'lvo

ire

Eth

iop

ia

So

uth

Afr

ica

EM

Glo

bal

Pan-African GDP growthDriving accelerated organic growth over the medium to long term

2018 2019 2020

This complements the diversification created by SEM for the Sanlam Group as the spread of markets, products and product lines across different growth regions contributes to resilience and risk mitigation. Our focus on standard system implementation, regulatory compliance, financial management and actuarial expertise strengthens the cluster’s in-country operations. The ability to transfer skills to those markets and standardise offerings creates value for business units, employees, clients and broader society.

The growth opportunity is predicated on low insurance penetration and Africa’s demographic dividend, underpinned by a growing labour force, rapid urbanisation as well as a burgeoning middle-class in many markets with increasing disposable incomes and demand for goods and services.

In the Other International sub-cluster, the India and Malaysia economies are forecasted to continue with robust GDP growth going forward.

We are well positioned to increase insurance penetration and uptake as the cluster is gaining a deeper understanding of client insights and needs across different markets. We further adopt a client centric approach to product design and our distribution channels are effective and resilient. Regulatory changes unfolding on the continent further support the insurance business proposition.

Outside of South Africa, general insurance has a higher penetration rate than life insurance. While opportunities exist across both lines, there is a longer-term opportunity for us to grow our life portfolio by increasing and optimising distribution and launching new products. In particular, Sanlam’s deep life insurance expertise positions us well to grow this line of business, which spans across a number of markets with favourable demographic profiles, strong economic growth prospects and low insurance penetration. This includes North and Francophone Africa, which are currently predominantly focused on general insurance.

101INTEGRATED REPORT 2019

04OUR 2019 PERFORMANCE

Our African footprintMarket share target: Top 3 Africa, Top 10 India and Malaysia

Angola

Nigeria

Morocco

Mozambique

Zambia

Tanzania

Rwanda

South Africa

Botswana

Côte d'lvoire

Namibia

Uganda

Lebanon

Kenya

Zimbabwe

Malaysia

India

Developed

Malawi

Life insurance Market share/Position General insurance Market share/PositionCountry and e�ective interest

68% 50%

60% 60%

100% 100%

57% 57%

70% 57%

100% 62%

59% –100% 37%

56% –

47% 47%

99% 82%

38% 38%

35% 35%

57% 39%

40% 40%

24% 24%

51% 49%

42% 43%

Various –

– 23%

68,0%/1

63,0%/1

59,0%/1

42,0%/2

29,0%/1

27,0%/1

25,0%/2

25,0%/2

15,0%/3

15,0%/4

10,6%/4

14,0%/3

5,0%/7

7,7%/4

4,0%/6

2,0%/120,7%/17

0,2%

–

3,0%/12

23,8%/2

20,0%/1

35,0%/1

10,3%/4

22,0%/1

37,0%/1–

25%/1

16,4%/2

5,0%/7

2,0%/18

2,0%/18

15,8%/2

17,6%/1

2,0%/191,2%/19

–

18,7%/2

Contribution to Group Equity Value at 31 December 2019

SPA

Non-Life

SPA Life Other international

(India/Malaysia/Lebanon)

58%2019

26%

16%

2019 operational performance overview Performance was characterised by satisfactory growth in new business volumes in most of the SEM operations. Negative impacts included high general insurance claims experience in key Saham markets, the weakening of the Angolan and Zimbabwean currencies, soft topline growth in Kenya as well as pressure on the Lebanese economy and general operating environment, which detracted from portfolio results. The impact of operational challenges in certain markets was mitigated by the geographic diversification of SEM’s profit sources.