A new CEO, good and proper
Lizé Lambrechts tenure as Santam CEO was marred by last year’s business interruption debacle. Who’ll be next?
Santam was long considered among the best profit generators on the JSE.
Apart from the underwriting profits on its insurance policies, it would make a tidy sum from its free float income on the cash it holds.
Yet its shares have been lacklustre underperformers for some time now, dropping almost
14% over the past 12 months against a financial index that has rallied almost 18% in the past year. In that light — and given Santam’s less than glorious run-in with its clients over its initial refusal to pay their pandemic-related business interruption claims — CEO Lizé Lambrechts’ decision to “retire” next year looked highly likely. Still, she says: “CBI [contingent business interruption] has not played a part in my decision.”
In fact, she says, “we have attended to virtually all the claims where clients have submitted all the necessary documents”.
But it wasn’t like that at first.
For months insurers refused to pay claims related to the government’s pandemic-related lockdowns, until the Financial Sector Conduct Authority (FSCA) eventually stepped in in July last year, forcing them to pay up. Santam, which had initially refused to settle lockdown-related claims, did a U-turn and agreed to pay R1bn in “urgent relief.”
On the about-turn, Lambrechts said at the time that Santam “recognises that these are extremely difficult times for businesses” and is “determined to assist policyholders”.
But by the time it started to pay CBI claims in January, many of its clients had already gone out of business.
The decision to pay up came at no small cost and Santam ended up with total losses on its property line of business, which includes CBI, of R2.41bn for the 2020 financial year.
The past year has marred Lambrechts’ otherwise solid tenure at the insurer. Lambrechts, who has now spent six years with Santam, says there was no need to restructure the company when she moved from Sanlam in 2015, but she made it more “future fit”, with a focus on profitable customer acquisition, developing talent and investing in technology.
And she brought the largely autonomous underwriting management agencies closer to the mother ship.
SHA, the leading liability insurer in SA, was changed from a separate company to a division of Santam, and its board was disbanded. The 45% minority stake in engineering underwriter Mirabilis was bought out. This, Lambrechts says, means that Santam’s specialist businesses are now “all in leadership positions”.
But without the shareholding of their founders these units might lose their entrepreneurial flair.
Still, Santam’s numbers from her first year as CEO to her last are hardly inspiring.
In the 2015 financial year to end-December, Santam made an operating profit of R2.46bn with a net underwriting margin of 9.6%.
Last year, thanks to the business interruption claims, Santam made a net profit of just R646m, with an underwriting margin of only 2.5%.
Lambrechts will be in the job for at least another year while the board seeks her replacement.
The board itself has been strengthened with four new appointments, all women. Pinky Moholi, the former CEO of Telkom, is the new chair after the retirement of Vusi Khanyile. Another appointment is accountant, actress and TV producer Shadi Chauke. And there are two former executives from archrival Mutual & Federal (now Old Mutual Insure): Debbie Loxton and Caroline da Silva. Da Silva also worked for seven years at the FSCA.
Sanlam, as the majority shareholder in Santam, will ultimately decide who takes over from Lambrechts.
She and her predecessor Ian Kirk were both on the Sanlam executive committee before they took over the hot seat at Santam. And Kirk’s predecessor Steffen Gilbert, who was head of Munich Re and unconnected to Sanlam, did not last long.
The two Sanlam divisional executives who fit the bill as both black and strong managers are Bongani Madikiza, head of the mass market business, and Kanyisa Mkhize, head of Sanlam Corporate. Lambrechts remains a believer in the intermediated sales model, as she did in her previous job as CEO of the Sanlam personal finance (core life insurance) cluster.
Old Mutual Investment Group analyst Neelash Hansjee says the Santam share price has lagged the financial sector, which in turn has lagged the overall market.
Much of that may be explained by the business interruption issues, though he says the group’s provisions for CBI “look full”.
Abax portfolio manager Anthony Sedgwick says the Supreme Court of Appeal hearing on the indemnity period for which claims are valid should be held by September, and a fair resolution could lead to a relief rally, with the Santam share price bouncing back.
But Santam certainly isn’t the only insurer that has been shunned by the market.
Sedgwick says he finds it perplexing that the share price of Rand Merchant Investment Holdings, which owns Outsurance, has also been disappointing, “even though it has paid out all its CBI claims and Outsurance has reported record profits”. x