By jason Fittler
SUN has appointed Patrick Snowball as CEO.
The appointment appears positive with Mr Snowball having a very strong background in general insurance. The hire also satisfies shareholder requests that the board select an insurance specialist to run SUN. Mr Snowball starts with the company on 1 September 2009. Mr Snowball’s track record appears sound including;
1) 19 years with Aviva, the world’s fifth largest insurance group, and its predecessor from 1988-2007;
2) group executive director, Aviva UK, from 2005-07;
3) various senior Aviva roles from 2002-07 including chief executive director UK GI, UK Life, Ireland GI and Life, Canada GI and Asia; and
4) two years at Towergate brokers as deputy chairman and chairman.
Mr Snowball’s selection will likely fuel speculation that SUN will try to divest its banking assets, particularly after recent organizational restructures. While we see divestment as likely longer term, near term this appears challenging, particularly given recent comments by Graeme Samuel (ACCC chairman) that he would not look favorably on further big four bank acquisitions.
In our view, this announcement provides a positive catalyst for SUN and removes an area of uncertainty with the stock.
Nevertheless, Sun’s investment case remains dominated by market focus about its banking operations. We believe that the best outcome for SUN shareholders is full divestment of the bank.
However, even if it is retained by SUN, which is our base assumption, our target price of A$7.35 represents about 12% upside.
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