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Andre Lombard

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GROUP STRATEGY
Feedback Session
28 February 2013
AGENDA
GLOBAL ECONOMIC OVERVIEW
GUEST SPEAKERS
Chris Gilmour
SOCIO POLITICAL UPDATE
NATIONAL DEVELOPMENT PLAN
Eusebius Mckaiser
Kuben Naidoo
11h40 – 12h10

12h10 – 12h20

12h20 – 12h40

12h40 – 13h40

13h40 – 15h50

15h50 – 16h10

16h10 – 16h30

16h30 - 17h30

17h30 – 17h45
GLOBAL ECONOMIC OVERVIEW
Chris Gilmour
SOCIO POLITICAL UPDATE
Eusebius Mckaiser
NATIONAL DEVELOPMENT PLAN
Kuben Naidoo
01
02
03
Provide each and everyone of our partners with a source of competitive advantage in their own markets
TCF
What is TCF?
The Evolution of the Partner Aim
Partner Aim
“To provide each of our partners with a competitive advantage in their own markets”

Why the Change?
As it stands
Partner Aim
Proposed New
“To deliver more for everyone by understanding, supporting and empowering our partners”
Progress
List of competitive drivers finalised
Continuous Improvement (Operations and bottom line)

Getting into partners’ heads (Getting closer to partners strategic mind-set, aspirations and long term goals)

Value add services and resources

Sustainability and Innovation

Master of your own destiny
Why do we need TCF?
The shift to treating customers fairly is not optional for us – it’s part of who we are and the way we do business.
Our business is about delivering for partners and customers
Supports our Customer Centric aim
Supports our Social dividend
Long term financial gain from treating customers fairly
The Hollard Way
Catalyst for positive and enduring change
The fairness outcomes of

Customers are confident that they are dealing with firms where the fair treatment of customers is central to the firm culture.
1
3
2
4
5
6
TCF
Culture and Governance

Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.
Product Design

Where customers receive advice, the advice is suitable and takes account of their circumstances
Suitable Advice
Customers are given clear information and are kept appropriately informed before, during and after the time of contracting.
Clear Information
Customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect.
Performance
and Service
Customers do not face unreasonable post-sale barriers to change product, switch provider, submit a claim or make a complaint.
Claims, Complaints and Changes
The Hollard TCF Vision
To go beyond the basic principles of TCF by building win-win relationships with our policyholders and embedding the fair treatment of customers in our culture, strategy, and processes. In doing so, we earn the right to a sustainable future.
What progress has been made to date?
Initiated the Hollard TCF program in December 2012 with the approval of the Hollard TCF Vision by Exco.

Developed a 2-year implementation roadmap.

Finalised the project governance structure and developed a holistic TCF communication plan.

Initiated the project with the working committee.

Completed the FSB baseline TCF readiness assessment across Hollard’s Life, Short-Term and Investment licenses.
The way Forward
SAM & TCF Update

Megatrends update

Aims (Part One)

Lunch

Aims (Part Two)

Tea break

Open discussion

Richard Mulholland

Closing
SAM
Define Hollard's TCF
standards
Identifying risks and controls and update risk management framework
On-going monitoring and governance
Define the solutions to close the gap
Perform gap assessment
Implement
solutions
Solvency Assessment and Management
Drivers
Impacts
Hollard Response
Commercial
to play or not to play
Status of project
3 x Workshops held

Broker Survey conducted

Decision made: Hollard WILL enter the commercial market in a significant way

Decisions not made:
Build or Buy
How to differentiate offering?

Next step: Build Business Case
HALF
commercial and corporate
size of market
R38 bn
Mix estimate
per annum
motor
27.2%
property
39.8%
specialist risks
33.0%
Commercial
70%
R27 bn
up 60% over the past decade
Estimated
CAGR
since2007
commercial
10%
corporate
3%
personal lines
8%
total short term insurance
Competitive Landscape
Strengths
Strongest brand

Best technical skills

Most advanced with segmentation

Good standard claims settlement

Good strategy and trend communication
Clear market leader
Weakness
Inflexible, bureacratic

Systems adequate, not leading edge

Seen as predominantly Afrikaans

Difficult around more complex claims
by brokers
How is Hollard Perceived
LIMITED
capacity
NO "ONE STOP SHOP"
confusion
BUT
on the positive side
Strong brand and credibility

Hollard's high Levels of trust
The Broker View
Independent brokers likely to focus increasingly on commercial because:
Personal lines increasingly commoditised and disintermediated.
A good broker can add real value in commercial business.

Market consolidation will accelerate in broker space (driven by FAIS, binders) and in underwriter space (driven by SAM, skills)

Underwriter consolidation viewed positively by brokers:
“One stop shop” concept much easier to deal with
Insurer efficiency being driven at the back end rather than at point of sale
(Procurement)

Administrators’ inevitable demise accelerating - room for one or two, rest will be consolidated into insurers or survive as UMA’s
Personal Lines
market
R31
Santam
Telesure
Hollard
Outsurance
other players make up 43% of market
bn
23%
12%
11%
11%
R7.22bn
R3,80bn
R3.40bn
R3.39bn
Currently dominated by 4 large players
in 2011
2.5
m
Insured Car Park
vehicles
Direct
is starting to dominate
Telesure
Outsurance
MiWay
700 000
300 000
150 000
motor policies
Hollard
motor policies
Statistic Health Warnings:
Motor insurance class reports include uncertainties regarding the make up of Personal Lines, commercial and corporate.Not everything is genuine motor insurance e.g. warranties, ODP, Extended cover, etc
looking under the hood
Hollard
Top 5
7 Partners
have more than
10 000 policies each
partners by number of policies have between 15 000 and
20 000 policies per partner
20 Partners
experienced a decline in number of policies in force in 2012
1.3
bn
“Real” Personal lines GWP
Time to think differently?
Consumers | Regulators | Competitors
Our response
500,000
motor policies by
2020
Create a differentiated Product
supports, innovates & consilidates
overall objective of owning
DEMANDING
Customer value proposition
Product/ Pricing
Marketing /Brand
Distribution/ Customer Segment
Operations
Technology
Procurement
Finance
Kenneth Coetzer
Bryan O’Donovan
Michelle Davadoss
Shaun Neuhoff
TBA
Francois Potgieter
Anton Botha
Kenneth Coetzer
Steering committee
Workstream owners
plus
Nic Kohler, Nick Stern,
Mandla Shezi, Tanya
Massyn, Annelize de Jong
The workstreams
Win the war for talent by attracting, developing and retaining the best people
2015 TARGET
Previous
Period Measure
2015 AIM
Improve Employee Satisfaction
top 5
in our category
loss of <5% of top performers
(Jul 2012 - Sept 2012)
10th
in our catogery
4%
Current Measure
(Oct 2012 - Dec 2012)
10th
in our category
2%
2015 AIM
2015 TARGET
Previous
Period Measure
Develop Talent to Deliver on Business Strategy
65%
management vacancies
filled internally
% of Performance contracts cascaded from the Hollard Aims, via the business drivers
(Jul 2012 - Sept 2012)
29%
85%
Current Measure
(Oct 2012 - Dec 2012)
18%
85%
2015 AIM
2015 TARGET
Previous
Period Measure
Improve Success Rate in Recruitment
75%
batting average
Recruitment Response Time
Cost per hire
(Jul 2012 - Sept 2012)
75%
batting average
Current Measure
(Oct 2012 - Dec 2012)
67%
batting average
Post Recruitment Employee Satisfaction Index
118 Days
R122 027.00
8%
Average % of TCC placement fee
TBC
92 Days
R40 202.00
14%
TBC
2015 AIM
2015 TARGET
Previous
Period Measure
Improve Human Capital Value (HCV)
20%
bench strength
ready for promotion per level
coverage of successors per key role Improve intellectual capital value at recruitment stage
(Jul 2012 - Sept 2012)
Under Review
due March 2013
2015 AIM
2015 TARGET
Previous
Period Measure
Diversity Management
12.5
out 15 points
as per Financial Sector code by 2016
(Jul 2012 - Sept 2012)
9.7
Current Measure
(Oct 2012 - Dec 2012)
9.22
60%
Embedding the Hollard Way
Practice Under Review
Recruitment and Assessments

Onboarding

Performance Management

Reward & Recognition

Diversity
Hollard Life
2013 Q2 Financial Performance
Hollard Group
2013 Q2 Financial Performance
Hollard SA
2013 Q2 GWP
Hollard SA
2013 Q2 OPEX
Hollard SA
2013 Q2 NEBT
Hollard SA
2013 Q2 Financial Performance
Hollard Insurance
2013 Q2 Financial Performance
Hollard Insurance
2013 Q2 NEBT Analysis
Hollard Life
2013 Q2 Financial Performance
Hollard International
2013 Q2 Financial Performance
Financial Review
Hollard Insurance GWP 2008-12
Key take outs
4%
CAGR
Santam, market leader with 23% market share, grew at 8% per annum
Outsurance and Auto & General grew by 15% and 9% CAGR respectively
Etana 35% CAGR | Legalwise 11% CAGR | Oakhurst 18% year-on-year
Mutual & Federal and Zurich down 3% CAGR
2008 - 2012
Hollard’s growth in line with market but below budget
market growing at
Short Term Competitor
LIFE
Key take outs
Remains an attractive growing market
But competition is fierce
3%
Market share means we have scope for growth
Old Mutual, MMI, Sanlam, Liberty & Discovery = 80% of market
Hollard Life
Life Market Share
Megatrend
ONE BILLION
500 MILLION OF WORKING AGE
35

7
1.1bn working age people by 2040
among 10 fastest growing economies in the world between 2010 - 2015
African Countries
top 5
fastest growing investors into new projects in Africa
three
are African
US$2
trillion
AFRICA'S COLLECTIVE GDP
OVERALL THE AFRICAN MARKET LOOKS ATTRACTIVE
African countries ahead of Russia on transparency International’s Corruption Perception Index
African countries ahead of China on the EIU’s Democracy Index
…and despite the negative SA economic outlook, ongoing Egyptian crisis and civil strife in several countries African growth remains resilient
Source: African Attractiveness Survey 2012, Ernest & Young
The African insurance market is currently small and underdeveloped
GWP of insurance industries in Africa during 2011 9in billions of US$)
Gross Capital Formation is expected to continue growing across Africa and will be a key driver of commercial insurance growth presenting opportunities
Mass market and addressable low income consumers constitute a low proportion of Sub-Saharan Africa markets which presents a highly fragmented opportunity
SA’s insurance GWP is ~35x greater than the next largest SSA market
Source: SwissRe’s World of Insurance report (2011)
Source: The World Bank Databank
Note: Gross capital formation consists of outlays on additions to the fixed assets of the economy, plus net changes in level of inventories
A segment we do not understand with very limited spending power
Source: UN Development Report, Burlington Analysis
* AMPS data
Not our core profit segment
MEGATREND
THE DISENFRANCHISED LIVING IN A CAPITALIST WORLD
What are we doing about it?
BRICS Risk Pool concept
BRICS
Conclusions
Broker market is evolving:
Greater commercial focus, personal lines dis-intermediated

Broker Consolidation likely
To play seriously in this market, Hollard needs:
Footprint
More Technical skills
Enhanced systems
Capacity, along with increased limits
“one stop shop”Differentiated offering
funding (for acquisition)
Appoint champion to lead project
video for interconnected
64%
of people buying insurance research online
leverage the digital asset
we have created to increase Hollard’s visibility, deliver premium experiences to users and sales to business
create a space that is unavoidable
an authentic Hollard presence that delivers content, utility and service to deepen customer relationships
buy off-line
contactible, trackable and responsive
on the customer's channel of choice
provide consistent, best practice digital experiences and efficiencies
that strengthen the Hollard Group proposition


Insurance is low on the priority list for buyers – but HIGH on the list of online advertisers

Experience Curve: 5 years on the Internet was a key level of experience for users to engage in transactional behaviour and to participate in the digital economy.
commercially viable sales channel
to take advantage of the emerging eCommerce behavior
relevant BRAND
with an increasing share of voice
working together with our partners to
establish a
an integrated and
To be a significant contributor to human, social and natural capital through the business that we do and the way we do business
To be recognised, trusted and recommended above all others by our customers
FOCUS AREAS
over last
3-6
months
TCF
Primary Focus
Secondary Focus
Hot Seats
Vula Vula
HCNN
Voice of the Customer
Project
Prototype HDS Sales and Administration/ Claims wraps up Feb 2013.
Results to date:
10% response rate = 1242 complete surveys and 1776 partially complete.
403 “High-5s” .
68 of 115 individual complaints recovered.
Customer satisfaction rating 75%
Current focus areas:
Customer satisfaction measurement model
Identifying KPIs from Echo for performance contracts
Definition of a continual business improvement process
Defining the roadmap for the next 2-3 years in rolling out Echo
Identifying quick wins / opportunities to expand the prototype
Achieve competitive
advantage through
operational excellence
The Evolution of the Operations aim
The Operations Aim
“Achieve positions of competitive advantage in our operations”
Intention then:
Approach now:
Create a knowledge centre of excellence that would:
Track Customer retention
Coordinate collaboration around operational excellence
Implement a Hollard house view on appropriate risk management strategies
Create economies of scale in our supply chain and manage the complexity and cost of information technology.
Segment according to Hollard ability to influence:
Group Initiatives
Internal controlled operations
Outsource operations
Hollard partners
Identify 3-5 highest impact strategic initiatives per area and report back quarterly
FOCUS AREAS
over next
6-12
months
Group Initiatives
Internally controlled Operations
Outsource Operations
Hollard Partners
Project Echo Rollout
PRO: Combined Motor Strategy
Information Technology
Risk Management
New Personal Lines Initiative
Life Ops
Sales Call Centre
Exiliti
Hollard Wealth
SLA implementation, tracking & enforcement
HSBU
HCM
HLC
Next steps
Steering Committee for each segment to establish key strategies for that segment
Each segment will have at least 3 strategies, to be monitored quarterly and reported to the Board
Generate 50% of our growth in profits offshore
The Evolution of the International Aim
International Aim Proposed New
“Grow our Afro-Asian business by 25% per annum to generate R350m in total Value Add by 2015 (R650m by 2018)”
Progress against targets
Africa
NEBT + EV Growth R300m by 2015
SADC Life Strategy Implemented
2 NEW territories by 2015 (add to 4 current)
Implement Barclays JV in 5 territories
25% of Portfolio consists of HCM partner bus
International Reinsurance Reviewed
India
NEBT + EV Growth R70m by 2015 (Amsure)
Pursue license discussion
Accommodate regulatory change
China
R40m NEBT from brokerage
R100m GWP from China/Africa initiative
Dphone JV breakeven
R160m (2013 est)
Licence in place
Negotiations underway
2 launched; 3 in discussion
15%
50% complete
R40m
Early Stages
100% compliant
Trading started 2013
R15m
80%
Development / Actions
Motor results under pressure (currency weakness)
Life offering through alternative distribution targeting middle/ upper income
Zambia already generating profits
Distribution initiatives under way with Edcon, PEP, Standard Bank, Botswana Post Office, Bayport and Izwe

Amsure/Amserve new products - mixed results
Arcadia brokerage being restructured
African/India initiatives being explored
Legalwise Pilot

Dphone – developing internet based marketing to 700 000 clients
PICC strategic co-operation in place
Chinese construction projects in Africa insured by Hollard & partners
Africa
India
China
BRICS
Risk
pool
08h45 - 11h40
NEW
growth
path
step change
quantum leap
inflection point
accelerate
break out
seize the moment
burn the boats
change trajectory
strike while the iron is hot
Needs must when the devil drives
Uncle SAM wants you...
Reacting to the disenfranchised megatrend
Short Term Market Share
SAVINGS AND CREDIT
Hollard
STRATEGY
WHY
Growth through a comprehensive product set that addresses the core needs of our clients
A requirement to win in the low income segment and
A requirement for sustainability in the mass market segment
Supports development of new distribution channels
Our competitors are doing it
Our Credit provision Partners are growing their insurance businesses
Only two products that drive the deepest levels of loyalty
They are complementary products
Savings-backed lending to consumers
Retail savings very attractive funding source
Our customers use a range of financial instruments, including savings and credit, in order to achieve their personal goals
Shopkeeper credit
Loan from moneylender
Daily rotating savings club
Burial society
Bank account
Hiding cash in house
Saving
with a moneyguard
Interest-free loans to others
Giving credit to customers
Accumulating savings clubs (6 of them!)
Savings held for neighbors
HOW
can we competitively deliver on our customers financial services needs beyond insurance (particularly credit and savings) given
our unique assets and capabilities?
this need and objective was also identified as part of the financial megatrend project
Insurance beyond South Africa
Beyond insurance (Credit and Savings)
22M
Earn <R2K per month
8MEarn between R2K and R8K per month
4MEarn >R8K per month
Africa Strategy
Credit and savings project
FIMT II
FIMT I
HAD Core segment
Source: AMPS 2010
In the ‘emerging consumer’ space competitors provide both savings and credit products and appear to offer these profitably
Savings is a core need for emerging consumers but providing value can be complex
70% of HAD’s GWP is written behind a credit relationship and is growing at 17% while the rest is stagnant …
Note: Other credit includes mortgages and credit cards
this, in spite of credit markets that have declined in real terms in all but unsecured lending …
Source: Eighty20
however in most credit verticals we are being ‘crowded out’ as a result of credit providers’ growing insurance capabilities and ambitions …
* Underwriting profits = NEBTOX for Hollard and all payments to partners (i.e. profit shares, brand fees, commissions, etc.)
and this trend has been exacerbated by our continued overhead investment in these partnering models which has resulted in a further squeeze on margins
Some players have successfully used credit to increase existing customer loyalty
Example: Discover Viitality ecosystem
Questions
What role we should play in the consumer credit market going forward in order to defend and grow our profits derived from consumer credit relationships (70% of HAD alone) ?
How can we competitively deliver on the (unmet?) needs of our consumers by leveraging existing assets and capabilities into credit and savings offerings ?

How can we use credit and savings to increase stickiness of our insurance clients and partners?
The Credit and Savings project
LOYALTY
Project
Scope of project
Develop a proposal for our mass market customers that rewards loyalty.
Programme that differentiates us from our competitors
Built on a rigorous and sound understanding of the characteristics of the market
Examples of good loyalty offers
Generic – clicks and fanatics
Financial services – e-bucks and nedbank greenbacks
Insurance industry – vitality and multiplier
Benefits of loyalty
Develop customer insight and knowledge
Increase customer participation and spending.
Strengthen customer relationships.
Exceed customers’ expectations and grow the customer base.
Objectives for loyalty
Maintain sales, margins and overall profits
Increase the loyalty and future value of existing customers by driving incremental volumes
Encourage cross-sell activity from existing customers
Increase persistency
Differentiate the brand
Prevent a competitor from launching an equivalent reward programme.
Work Streams
Project next steps
Growth ELEPHANTS
HCM
Data
Warehouse
Discovery
Insure
Hollard
Investments
HDS
Loyalty
Personal
Lines
Savings and Credit
Commercial
Existing Social Dividend Initiatives
Government Engagement
Building State Capacity
Enterprise Development
Harambee
Foundation
FIMT Aim I
address financial goals for emerging consumers in Africa and across emerging markets.
Meetings held with Dept of the Presidency, NPC, DIRCO, Dept of Trade and Industry,National Treasury,Gauteng Premier Office
FIMT Aim II
catalyst for mitigating risk and promoting economic inclusion for the vulnerable poor in Africa and across emerging economies
Involved in subcommittee of BLSA targeting NDP popularisation and govt engagement
Review existing SMME development opportunities (Apexx Motor Assessors, YGoGreen & Neosho)
Review Procurement Practices to support BEE businesses(ED Approach to MBR’s)
B. Embedding Sustainable Business Practices
Brokers view
on competitors
Full transcript