Sanlam Limited · JSE:SLM
Sanlam — Conference Presentation (2021)
37 slides from Sanlam's conference presentation, 2021
Slide 1: Guidelines for this Webinar
Guidelines for this Webinar Your cameras and microphones have been disabled for this webinar Send through Questions via the Q&A button on the toolbar, these will be addressed at the end A recording of this webinar will be made available to you.
Slide 2: Some Thoughts on the Budget
SOME THOUGHTS ON THE BUDGET Plenty of honesty "Further increases in personal income taxes would put additional pressure on households that have been negatively affected by the pandemic and undermine the chance of a stronger economic recovery. There is no compelling case for increasing these rates at
Slide 3: Budget 2021
BUDGET 2021 Focus on retirement industry Proposal re “various” annuities Tax on withdrawals – no longer tax resident Transfer between funds (older than 55) Access to retirement assets in disaster (linked to mandatory preservation) Regulation 28 (infrastructure / private equity) Auto-enrolment and co
Slide 4: Conditions for Default Smoothed Bonus Policies
CONDITIONS FOR DEFAULT SMOOTHED BONUS POLICIES Danie van Zyl Sanlam Smooth Bonus Centre of Excellence Insurance | Financial Planning | Retirement | Investments | Wealth
Slide 5: New Regulation Ahead
NEW REGULATION AHEAD
Slide 6: Smoothed Bonus Portfolios
SMOOTHED BONUS PORTFOLIOS Saving for retirement can be bumpy Need to navigate uneven terrain and obstacles
Slide 7: Four-wheel drive
four-wheel drive … giving members greater stability and control
Slide 8: Smoothed Bonus Conduct Standard
SMOOTHED BONUS CONDUCT STANDARD Why? What? By when? Who?
Slide 9: How Does It All Fit Together?
HOW DOES IT ALL FIT TOGETHER? Pension Funds Act Default regulations Default investment Reg. 37 - 40 portfolio Reg. 37 Can use smoothed bonus portfolio if comply with Standard Default annuity strategy Reg. 39 Can use living annuity if comply with criteria
Slide 10: Why?
WHY? ⧁ Smoothed bonus portfolios are perceived to be complex ⧁ Poorly understood by members defaulted into them ⧁ Aims to provide additional security to members ⧁ Place onus on retirement funds
Slide 11: But Play Important Role
BUT PLAY IMPORTANT ROLE Smoothed bonus portfolios are often used by retirement funds For members close to retirement • example in a lifestage For members who are loss averse Benefits illustrated during March 2020
Slide 12: Timeline
TIMELINE 1’st draft Final standard Effective Feb. 2018 Nov. 2018 June 2020 Oct. 2020 June 2021 2’nd draft Published Sanlam started engagement with FSCA in 2017 Feedback via ASISA
Slide 13: Applies To
APPLIES TO Retirement funds with a DC category, using smoothed bonus portfolios as their default Although aimed at retirement funds insurers need to provide trustees with sufficient comfort Excludes member choice portfolios
Slide 14: What Does This Mean for Trustees
WHAT DOES THIS MEAN FOR TRUSTEES Reg 37 - Demonstrate to Authority on request Default investment portfolio is appropriate Consider fees and charges Expected risk and return Other factors 2 5
Slide 15: Portfolio Range Affected
PORTFOLIO RANGE AFFECTED Portfolio Need to comply? Monthly Bonus Fund Y (incl. Volatility Protection Strategy in umbrella fund) Stable Bonus Portfolio Y (incl. Capital Protection Portfolio in umbrella fund) SMM Vesting Fund Y Progressive Smooth Bonus Fund Y
Slide 16: Standard Consists of Different Sections
STANDARD CONSISTS OF DIFFERENT SECTIONS Relevant sections 1 Definitions 2(1) – 2 (4) Product related requirement 2(5) – 2(6) Investment strategy 3 TCF Communication
Slide 17: Product Related Requirement
PRODUCT RELATED REQUIREMENT Bonuses = formulaic Disclosed to all stakeholders Also disclose fees & charges (commensurate with risk) • Sanlam disclose all fees, also TER & TIC Limit deviations to 2% p.a. Will show additional requirement using our bonus formula as an example
Slide 18: Example Bonus Formula
EXAMPLE BONUS FORMULA Stable Bonus Portfolio Bonus = i + (FL – 103%) / (24 – m) - fees FL > 115% m=12 i : expected long-term monthly return on the product For 97.5% <= FL <= 115% m= 0 FL : funding level of the product 92.5% <= FL < 97.5% m= 10 m : months FL < 92.5% bonus = 0% net of fees Requirement
Slide 19: Example Bonus Formula
EXAMPLE BONUS FORMULA Stable Bonus Portfolio Bonus = i + (FL – 103%) / (24 – m) - fees FL > 115% m=12 i : expected long-term monthly return on the product For 97.5% <= FL <= 115% m= 0 FL : funding level of the product 92.5% <= FL < 97.5% m= 10 m : months FL < 92.5% bonus = 0% net of fees Requirement
Slide 20: Example Bonus Formula
EXAMPLE BONUS FORMULA Stable Bonus Portfolio Bonus = i + (FL – 103%) / (24 – m) - fees FL > 115% m=12 i : expected long-term monthly return on the product For 97.5% <= FL <= 115% m= 0 FL : funding level of the product 92.5% <= FL < 97.5% m= 10 m : months FL < 92.5% bonus = 0% net of fees Requirement
Slide 21: Example Bonus Formula
EXAMPLE BONUS FORMULA Stable Bonus Portfolio Bonus = i + (FL – 103%) / (24 – m) - fees FL > 115% m=12 i : expected long-term monthly return on the product For 97.5% <= FL <= 115% m= 0 FL : funding level of the product 92.5% <= FL < 97.5% m= 10 m : months FL < 92.5% bonus = 0% net of fees Requirement
Slide 22: Product Related Requirement
PRODUCT RELATED REQUIREMENT Stable Bonus Portfolio Factors/triggers for removing non-vested bonuses Funding level below 90% for 12 consecutive monthly bonus declarations Funding level below 80% All clients non-vested bonuses reduced by the same percentage This will reduce their book value In conjunc
Slide 23: Product Related Requirement
PRODUCT RELATED REQUIREMENT Stable Bonus Portfolio Factors/triggers for providing shareholder support (loan vs cash injection) Statutory requirement if deficit not expected to be eliminated - next three years Permanent support (capital injection) when the funding level remains below 80% (in conjunct
Slide 24: Product Related Requirement
PRODUCT RELATED REQUIREMENT Market value adjustment Pre-determined circumstances Not on death, retrenchment*, retirement Sanlam pays book value on death, disability, retrenchment, resignation and retirement No disinvestment penalties
Slide 25: Product Related Requirement
PRODUCT RELATED REQUIREMENT Issue ⧁ Limitation on deviations (2% p.a.) ⧁ Think back to April last year ⧁ OM’s AGP Stable Growth was supposed to declare -15% ⧁ OM used their discretion to only declare -5% In theory this is not allowed anymore, BUT ….
Slide 26: Investment Strategy
INVESTMENT STRATEGY Less flexibility Remain within stated SAA range Comply with Reg. 28 Material change in SAA, notify clients and FSCA Material changes not in line with investment philosophy – client opt out at book value Where change to protect solvency, notify clients and FSCA
Slide 27: Investment Strategy
INVESTMENT STRATEGY Issues Investment philosophy = moderate balanced fund Does not define “material” FSCA did confirm “notify” does not mean “wait for a reply”
Slide 28: Asset Allocation Range
ASSET ALLOCATION RANGE Stable Bonus Portfolio Asset Category Benchmark weight % Long –term range RSA Equities 32 10 – 50 RSA Interest Bearing Assets 34 10 – 60 RSA Alternatives (incl. direct property) 6.5 0 – 25 Foreign Equity 17.5 10 – 30 Foreign Interest Bearing Assets 7.5 0 – 15 Foreign Alternati
Slide 29: TCF and Communication
TCF AND COMMUNICATION Ensure fair treatment of members Insurer communication to Fund is “accurate, relevant, simple, easy to understand” Fund communication to members provide “clear information” Fund ensure - appropriate channels submit complaints re default portfolios
Slide 30: My View
MY VIEW Insurers have less flexibility Not too restrictive, will not impact portfolio negatively Levels playing field Requires lots more disclosure Hence 9 months implementation period Overall Supportive, our portfolios will comply
Slide 31: What Clients Will Receive
WHAT CLIENTS WILL RECEIVE Need to enhance our disclosure Mostly in Principles and Practices of Financial Management (PPFM) document From end Feb Updated policy wording Updated PPFM Certificate by statutory actuary FAQ document
Slide 32: Roll-out
ROLL-OUT Oct – Dec General “newsletter” and video communication to consultants Jan - Feb Webinar Issue updated documentation Mar - May Engage with clients
Slide 33: Quick Look at Performance
QUICK LOOK AT PERFORMANCE Net bonuses to 31 December 2020 (annualised) 12% 10.3% 10% 9.4% Stable Bonus Portfolio 8% 7.1% 6.5% 6.5% Monthly Bonus Fund 5.8% 6% 5.5% 5.1% 4.9% 4.4% 4.6% Progressive 4.0% 4% 3.2% 2.5% Inflation* 2% 0% 1 year 3 years 5 years 10 years REAL RETURNS 1 year 3 years 5 years 10
Slide 34: Proven Performance
⧁ four-wheel drive solution PROVEN ⧁ at the heart of each model same PERFORMANCE … fundamental engine technology ⧁ 100-years of track testing ⧁ trusted brand
Slide 35: Questions
questions 35
Slide 36: Thank you
thank you®
Slide 37: Sanlam Life Insurance Ltd is an authorised financial services provider
Sanlam Life Insurance Ltd is an authorised financial services provider. The mater ial is meant to provide general infor mation only and not intended to constitute accounting, tax, investment, legal or other professional adv ice or services. This information should not be acted on w ithout first obta