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International
Monday, May 1, 1989
Rolling the offshore ball

A number of local life assurers are putting money behind their claim that the South African assurance market is one of the most sophisticated in the world.
To prove it, they have been moving aggressively into the foreign arena — and this expansionary trend is gaining momentum. Favoured target is the United Kingdom, which is hardly surprising as the local life assurance structure was for the most part adapted from the British model.
The proponents of the offshore drive say that it makes sense to expand internationally, not only because the earnings of these subsidiaries provide a superb buffer against continued weakening in our exchange rate, but also as some feel the South African marketplace is nearing saturation point.
As Liberty Life’s chairman Donald Gordon commented last year at the Investment Analysts Society, “Being a relatively latecomer to the life assurance field, compared with Old Mutual and Sanlam, for example, Liberty Life was convinced that its future lay in establishing itself as an international insurance and financial services group.”
That these were not just pretty words is shown by the fact that Mr Gordon’s group became involved in the UK as far back as the early l960s when it bought a stake in Abbey Life, now a major player in the UK industry.
Liberty’s foreign assets have become so significant that the group has now hived them off into a separate company which is listed in its own right on the Johannesburg Stock Exchange.
This company, First Investment Trust, holds 49% of TransAtlantic Holdings via Conduit Insurance. In turn, TransAtlantic owns 28% of Sun Insurance, one of the UK’s major life offices: 41% (directly) of Continental & Industrial which is an investment trust fund valued at £160m; and 72% of Capital & Counties - a property development enterprise through which Liberty has big plans to launch its local “Eastgate” and “Sandton City” concepts onto the British market.
Although there is daylight between Liberty and the rest, other local life offices have also started making moves in recent times.
Old Mutual bought a smallish UK life office a Few years back and its strategy of sending out some of the group’s brightest management men is paying off handsomely. The Mutual’s offshore company holds a rapidly growing 1% of the UK life assurance market.
Both Southern Life and the smaller Crusader Life are currently in the process of building up UK stakes. Earlier this year, Southern bought a 13% stake in a British-based international finances group - Hansard Financial Trust Limited - for £12m. That Southern has further plans in this area is shown by the fact that its former deputy chief executive, Morris Bernstein, apparently scotched his plans to move to Australia to join the UK associate company.
The Southern move should come as no surprise. Its 40% shareholder Anglo American has already made the point that the offshore market offers exceptional growth potential - witness the ongoing bid by Anglo’s Minorco for Britain’s Consolidated Goldfields.
For its part, independent Crusader Life was on the point of acquiring a “small” life office in the UK three years ago, but negotiations fell through. Its second bite at the foreign cherry, however, had a happier ending and a Crusader spokesmen admitted to us that an “agreement” has been struck with (unknown) UK partners.
This company’s aim is to develop a small life office to represent Crusader directly in the UK. In addition, it is also in the process of establishing a life broking and financial planning company which will have a sales force of more than 20 consultants. This will complement an existing’ broking operation which Crusader bought some time ago. Crusader’s executive chairman, Don Rowand believes that the South African life assurance industry has a lot of proven ideas from which the international market can learn.
One which they will he pushing strongly is the “dread disease” concept, pioneered by Crusader in the local market and since followed by virtually all of the country’s big assurance players.
Mr Rowand believes the experience which Crusader has gained with dread disease policies on the home front will give it the ability to carve out a lucrative niche in the UK, a market which he says is “wide open”.
Another small life office, Norwich Life, has registered Claremont Life as a wholly owned subsidiary on the Isle of Man.
Norwich’s marketing manager, Stirling Kotze, tells us that at this stage Claremont Life only has a reinsurance licence, but he expects that the operation will become directly involved in life assurance in the UK and European markets within the next 12 to 18 months.
In addition, its reinsurance subsidiary, Claremont Life will also be acquiring a 5Qc/ in a Manx company which provides management and risk management services to insurance operations based on the Isle of Man.
Mr Kotze adds that the Isle of Man offers tax-free concessions and is well positioned to take advantage of the European marketplace once the changes envisaged for 1992 come into being.
Surprisingly, the Sanlam group remains adamant that it will not be getting involved with offshore stakes.
Its former Chairman Fred Du Plessis once stated that South Africa could not afford to export capital, at least while there was still a local market niche which life assurers can develop.
However, it looks as if the offshore ball is on the roll. Especially among the smaller life offices who have not been able to establish a suitable market share against the 60- 70% grip on the local market which San lam and Old Mutual hold between them.

Copyright © Insurance Times and Investments® Vol:2.5 1st May, 1989
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