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Short term Insurance
Saturday, December 1, 1990
A terrier in the insurance kennel

For someone who stumbled into the insurance world “by accident”, Miles Japhet hasn’t done too bad. After matriculating from Michael House, and prior to starting his studies, Mr Japhet took a temporary position with Price Forbes as a general office boy. Today, he’s MD of Hollard Insurance - a company he describes as a “terrier” in the sometimes “bulldoggish” world of short term insurance.
He adds, “It’s good to have terriers in the market. They keep the big boys on their toes.”
Getting back to the start of his career, Mr Japhet earned a scholarship from a textiles company, which sponsored his studies in the United Kingdom. He went to Bristol University where he earned a joint honours degree in economics and politics. On his return to South Africa, Mr Japhet started his military service. During the ensuing two years, the company, which made available his scholarship went into liquidation.
This released him of his obligations and Price Forbes invited him to re-join the group. He also received “an interesting offer” from Robert Enthoven Insurance Brokers. He decided on the latter and joined them in July 1979 as Patrick Enthoven’s personal assistant. Six months later, Mr Japhet and Hollard’s founder, Patrick Enthoven, left the company to form Hollard Insurance which began trading early in 1980. In 1985 Patrick Enthoven moved to California where he remains involved in the insurance business.
Hollard’s formation followed the purchase from Ned Equity of the Bastion Insurance Company shell with its insurance licence. Bastion had been set up in the early 1950s. In 1982, Mr Japhet left Johannesburg to open a Hollard office in Cape Town where he remained until 1983 when he returned to Johannesburg to take over responsibility for the company’s reinsurance and marketing functions.
Two years later, in January 1985, he became CE of Hollard Insurance and, after a further two years, was appointed MD of the company. Mr Japhet outlines his approach. “As a financial institution we sell security; we sell a promise which must be backed by security which can be added in two ways. The first is through a strong balance sheet. “You can get over not having enormous finances at your disposal by having a track record indicative of a high standard of integrity.”
Although the barriers of entry into the insurance business are high, Hollard relies on its track record. He notes that there remains a tendency by the public to opt for the “big blues”. This, he says, is understandable. “They give comfort because of their financial resources which translate into a strong balance sheet.”
Not that Hollard is in bad shape. The company started with capital of R1,2m and now boasts assets in excess of R100m. He adds that financial strength makes growth easier. This, combined with Hollard’s track record, augurs well for the future.
Looking back, Mr Japhet says Hollard’s core business has not changed. “We set out to be a niche insurer specialising in risk finance utilising the various self-insurance mechanisms. This remains central to our philosophy.”
Expansion, which has taken place over the years, saw these principles being utilised in the personal lines market. Although Hollard continues to operate in the personal lines arena, Mr Japhet adds that the company has halved its personal lines book over the last six months.
He notes, “We have done well in this market and will maintain a small exposure but I don’t believe we have a long term competitive edge. We will occupy niches where barriers to entry cannot be overcome by sheer size.” Mr Japhet does not believe the short term industry is over-traded. While our market is comparatively small, of the 30 or so registered insurers only 15 are truly active.
“Further rationalisation will create a greater tendency towards monopolistic practices. The market needs terriers and, because of the reinsurance mechanism, you don’t have to be big to be secure. You can access ten other balance sheets to hack up your promise. The issue is effective management of the business and its people. This is easier for a smaller company.”
He notes that certain smaller organisations lack focus. This is because they attempt to be all things to all men - something of which only bigger groups are capable. Mr Japhet believes that Hollard’s expertise and concentration on relationships will make it successful in the face of much larger opposition.
“As a small organisation we’re flexible and quick to react. Larger organisations suffer from delayed reflexes.” Hollard’s ability to adapt at short notice is evident from its management structure which Mr Japhet describes as, “shallow with very short lines of communication.”
Hollard currently employs about 30 staff members at its head office with a further 60 people in five offices around the country.
On the subject of risk management, he says, “We have created a financial risk management division headed by a former merchant banker. The object is to develop a relatively new perspective of risk management where we are looking to bring a less traditional approach.”
Looking ahead, Mr Japhet has clear objectives for his company. “We aim to remain one of the most profitable and cost efficient underwriters in the market. We are here to make money by seeking out opportunities which may arise and for which we are well suited and well placed.
“Profitability is the criteria - as a percentage of turnover.” Mr Japhet notes that a stock exchange listing is not an objective at this stage. “It may become necessary if growth is quick and needs to be sustained. But we have room for expansion on the existing capital base for the next few years.
“Being unlisted gives greater flexibility and the company is not strapped by dividend payments. It also means that you’re not in the public eye and, as such, can take a two- to three-year view on profitability.”
Hollard values its independence. He adds that it has no need or desire to become involved with another company. Control of Hollard remains with Robert Enthoven and his family.
Although Mr Japhet has really only had one job which he “eats, sleeps and drinks”, his wife and two young daughters do not take second place to the business of insurance. He also finds time for tennis, squash and occasional golf. Sailing and fishing are also favourite pastimes. By Bruce Allen

Copyright © Insurance Times and Investments® Vol:3.11 1st December, 1990
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