Sanlam's new boss focuses on boosting efficiency
April 22, 2003
By Edward West
Cape Town - Johan van Zyl, the former chief executive of short term insurer Santam, has spent the first few weeks in his new job meeting stakeholders to gain an insight into the issues that need to be addressed at the life assurance group and to get buy-in on a strategy.
Van Zyl, a former Pretoria University principal and vice chancellor, says he has been meeting Sanlam staff, independent brokers, analysts and people in some of the larger institutions where Sanlam has a large shareholding, such as Absa. He says Sanlam has not adopted a new strategy - the focus will be on better operational efficiencies.
The group's share price has been lagging for some time, in line with a downturn in the share prices of most financial institutions and because of a relatively weak financial performance last year, with headline earnings a share falling to 86.7c from 99.1c, due to uncertainty in the market following the sudden departure last December of the previous chief executive, Leon Vermaak.
Van Zyl says Sanlam's embedded value was about R10.50 a share. The share price closed at R6.25 on Thursday, meaning the discount to embedded value of the share price was close to 40 percent.
He believes this discount will persist as long as there is a net outflow of funds and there remains uncertainty about the group strategy in the minds of its stakeholders
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In the short term the aim is to sustain the improved investment returns at Sanlam Investment Management, grow sales volumes through more competitive products and resolve the questions about the group's banking strategy. Once these goals have been achieved, the negative outflow of funds should turn around to a positive inflow, says Van Zyl.
A life assurer's three major product distribution channels are through its own staff, independent brokers and banks.
Van Zyl says Sanlam has not yet achieved satisfactory distributions returns from its existing bancassurance arrangements and discussions with Absa, in which the group has a 23 percent shareholding.
The operations of Sanlam's own investment bank Gensec Bank, now the sixth-largest bank in the country, are being realigned to move it from investment type business to corporate banking business.
This process will reduce Gensec Bank's capital requirements and provide a more steady income stream for it, says Van Zyl.
He says Gensec Bank is already performing better on a relative basis and indications are that the improvement will continue
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