Alexander Forbes ready to ditch insurance arm
JOHANNESBURG – Alexander Forbes yesterday confirmed that it had put a “for sale sign” on its insurance businesses with insiders saying Sanlam is in pole position to acquire the assets. The firm, which revealed its new strategy in an update to shareholders, said that its “advice-led and capital-light” model would see it selling its insurance businesses which comprise of Group Risk, Retail Life, and Short-term insurance.
“The disposal of these premium businesses will be based on a value proposition that balances appropriate solutions for our clients, protects and values the employees who have contributed to the success of these businesses and realises fair value to our shareholders,” Alexander Forbes said.
“A new owner will be able to continue its success and fuel future growth through additional investment.”
The mooted sale of the insurance business marks a 360 degrees turnaround from the position the company took just over a year ago.
Minutes of a meeting held in March last year show that the board expressed confidence in the business.
Yesterday, Sanlam said: “The Sanlam Group has noted the SENS announcement by Alexander Forbes, an important business partner, regarding its strategic plans. Sanlam, as part of its normal business activities, will continue to consider opportunities that support our strategy on an ongoing basis and will continue to communicate to the market any relevant information impacting Sanlam.”
This month Business Report said that Alexander Forbes was planning to sell its short-term insurance business to Sanlam’s subsidiary, Santam, for R1.5billion to R2billion.
African Rainbow Capital (ARC) co-chief executive Johan van Zyl, who also wears the hat of Sanlam chairperson and chief executive of Sanlam’s biggest shareholder, Ubuntu-Botho (UB), seemed to have played a prominent role in seeing the deal through.
ARC, which is wholly owned by UB, is the second biggest shareholder in Alexander Forbes. Alexander Forbes yesterday also said it was looking at expanding its consulting, administration and investments businesses to leverage synergies and scale opportunities.
“Alexander Forbes will be exploring opportunities to acquire a similar focused employee benefit business that supports our strategy, the addition of which will enhance our ability to add value for clients and shareholders.”
A source close to Alexander Forbes said the company’s SENS statement was a smokescreen.
“The purchaser of the retail insurance businesses will be Sanlam, and in turn, Alexander Forbes will buy the Sanlam Employee Benefits business,” the source said.
The source said the deal was expected to be concluded by June.
Van Zyl is on record as saying that he had an agreement with the Sanlam chief executive to acquire Sanlam’s employee benefits assets.
“Here we have agreed with Ian that we move forward as quickly as possible, given their specific constraints. Our very clear understanding is that these assets will be paid for in AFH shares, which will subsequently be sold by Sanlam to ARC. Among others, these assets include Sanlam Umbrella Solutions, Sanlam Third Party Pension Fund Admin, the Sanlam Institutional Multi-manager; Simeka; etc. I will personally drive this from a Sanlam board perspective to ensure that things happen, quickly,” Van Zyl wrote in November 2017.
Sanlam said van Zyl would step down from his chairmanship role at the annual general meeting next year.
Alexander Forbes rose 2.4 percent on the JSE yesterday to close at R4.70.