The outgoing Sanlam CEO and chairman say they have no doubt that the new recruits who were announced on Tuesday morning will take the company to new heights. And their remuneration will be based on what they've personally contributed to the business rather than how market forces affect the company, they promised shareholders.
Sanlam announced on Tuesday that current group CEO Ian Kirk will leave the company at the end of his term in December, and board chair Johan van Zyl will be succeeded by former Public Investment Corporation CEO, Elias Masilela, from 10 June 2020.
READ | Sanlam announces new CEO among other sweeping leadership changes
Van Zyl will continue to serve as a non-executive director on the board, but Kirk will only keep external roles, such as his involvement in the industry body, the Association for Savings and Investment South Africa (ASISA).
Sanlam also announced on Tuesday that Abigail Mukhuba, who was the financial director at African Rainbow Minerals, will be taking up the role of group financial director.
Addressing investors and analyst on Tuesday evening, Kirk said the designate CEO, Paul Hanratty, who will take over the reins on 1 July 2020; as well as Masilela, are valued insiders in the Sanlam stable. Masilela, explained Kirk, held a senior position at Sanlam in the mid-2000s as head of policy analysis.
"He made a solid contribution to our growth strategy in various capacities...We regard Elias as a valued insider who's worked his way up in the Sanlam ranks," said Kirk.
As for Hanratty, who previously served as the CEO of Old Mutual South Africa in 2006, Kirk said his stint in the Sanlam board since April 2017 has enabled him to understand "many moving parts within the group" and strategic opportunities in the radar. Like Kirk, Hanratty was also appointed on a five-year contract.
"He's very familiar with the group's key opportunities, its challenges and the resources available to give effect to the strategy," he said.
Performance benchmark defined
Hanratty said Sanlam's existing strategy is sound and since it continues to drive value for shareholders. Therefore, new management and board will adapt it only where needed to maintain its relevance and competitiveness.
"I really do believe that all the building blocks are in place to continue to create value for all our stakeholders," he said.
That value will be measured by how the incoming executives grow the insurer's normalised return on group's assets and future profits from in-force policies. This measure, which Sanlam calls "return on group embed value", strips out the effect of market forces and of work done before the new management's tenure. The new executive team will also have to grow the value of shareholders' equity and dividends according to pre-defined targets.
While Sanlam started measuring its executives' performance in terms of actual instead of normalised returns about two years ago, outgoing board chair, Johan van Zyl, said the insurer would be going back to using normalised returns because management's rewards and incentives should not be based on whether the market was in their favour or not.
"The whole idea is to not let the markets conditions decide what the remuneration will be, but people's own efforts and not simply releasing somebody else's efforts into the income stream," said Van Zyl.