Message from the Group Chief Executive

It gives me pleasure to present Sanlam's 2011 Sustainability Report which forms part of our 2011 integrated annual reporting. I encourage you to read this report in conjunction with our 2011 Integrated Report. Together, these reports provide a strategic review of our performance during 2011, and will assist you in making an informed assessment of our prospects for the years ahead.

Sustainability is an overriding objective for all of our activities at Sanlam. We are a long-term business, a business that is dependent on building and maintaining long-term relationships based on trust. I have great difficulty with those who choose to adopt a narrow understanding of sustainability, who see it simply as being about protecting the environment or promoting corporate social responsibility, and as something quite separate from core business activities. I have a similar difficulty with those who constantly push us in business to take short-term decisions and to maximise short-term returns, when often this would be detrimental to the long-term interests of our business and of our stakeholders.

We believe focusing on long-term competitiveness rather than short-term profit ensures that we do not borrow from the future. It is for this reason that our decisions are made in a manner that will keep the sustainability of the business intact. Hence, the theme of both reports is: "Sustainability through Responsibility".

Our commitment to long-term value creation is reflected both in our history – we have prospered for 93 years and we have fared well during the current financial crises – as well as through our five strategic priorities:

Optimal capital utilisation:We're currently operating in a very volatile business environment, and need to ensure that we continuously survive a setback or two. Maintaining a buffer might mean that our immediate profits are smaller but it also means that we will be better placed to withstand potential turbulence. This is why we have consciously adopted a financially conservative approach.
Earnings growth:This same philosophy informs our approach to earnings growth. It would be very easy for us to push up our short-term profits, but short-term earnings growth should not be at any cost. In assessing the true value that we are creating, we have to measure what we take out, against what is being put in. Creating earnings growth by undermining the broader capital base upon which that growth depends would not be responsible, and is not in the long-run interests of our business.
Costs and efficiencies:An important part of our strategy is to protect value by cutting costs and maximising efficiencies. In doing so, once again, we seek to take a long-term view. It is important for us not to isolate our staff and customers by driving internal cost-efficiencies to the detriment of our service delivery. Adopting a more nuanced understanding of these relationships informs our continued success. Managing costs and efficiencies therefore requires that we adopt a very rigorous focus on our governance and compliance systems. In the interests of protecting value, we have invested significantly in these areas.
Diversification:Diversification is critical to sustainable value-creation. It is important not only that we protect value, but also that we create value. We have grown our business significantly in recent years, with an explicit focus on developing a more diversified income stream. The business now is more diversified in terms of the products and services and our client base. Not only have we diversified geographically – we're now in Africa, in the UK and in India – but we've also diversified our market in South Africa. In addition to our traditional market we now also have a very strong focus on new entrants and are more active in both the lower and higher ends of the market.
Transformation:Transformation is the core of sustainable development in South Africa. To grow and sustain our business it is imperative that our workforce reflects the demographics of our client base. This enables us to understand our clients and deliver tailor-made solutions to suit their needs. Our contribution to black economic empowerment is about the creation of wealth in a manner that enhances the long-term wellbeing of the country. If the country as a whole doesn't prosper, then our business certainly won't prosper.

I firmly believe that because we have adopted a long-term mind-set, based on prudent management of our resources and the development of good relationships with our stakeholders, we have done well relative to our peers. Our prudent approach has paid dividends, particularly during the recent financial crisis, and I have no doubt that it will stand us in good stead in an uncertain future. Despite consumers being under tremendous strain, especially in the middle market, we have very good retention rates and a comparatively low number of complaints, an indication to us that we're doing the right thing.

The fact that the share price is published every day is misleading: it's noise in the system,
when instead we should be interrogating the system as a whole."

- Johan van Zyl

While I am pleased with our performance over the past year – and with the various sustainability initiatives that we have taken and that are outlined in this report – I recognise that there are still some areas where we can do more. Although we have made great strides in fostering a more strategic appreciation of sustainability within our business, I believe that there remains scope for further integration of this thinking throughout our business. Similarly, I believe that while we have become a lot more vocal in terms of our investments with our own money – as reflected by our more active engagement with companies, which has seen us voting against proposals that we think are not in these companies' long-term interests – there are nevertheless opportunities for us to be even more vocal.

Looking to the future, I am concerned that as a country, and indeed globally, we are collectively undermining our long-term capacity to create value. I think we need to recognise that as an industry, we could play a bigger role in driving sustainability more broadly. Doing so would be to all our collective benefit.

Johan van Zyl
Group Chief Executive
December 2011

1. Sustainability Governance

2. Responsibility for Developing our people

3. Responsible products and services

4. Responsibility towards a prosperous society

5. Responsibility towards the natural environment

Message from the Group Chief Executive