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Monday, March 1, 1999
The long and the short of it

Metropolitan has acquired the entire long-term business of Commercial Union of South Africa Limited (CUSAF) for R350m. This comprises the company’s life, asset management and unit trust businesses, and leaves CUSAF to concentrate on its core short-term insurance operations. The acquisition was effective 31st December 1998, and follows agreement by shareholders on 25th January 1999. Approval of the Registrar of Insurance had already been obtained.
Metropolitan announced in October last year that it had purchased a 22% stake in CUSAF from Gold Fields of SA for R232m.
Peter Doyle MD of Metropolitan points out that by acquiring the integrated life operations of Commercial Union and Protea Life (the latter was taken over by CUSAF in 1996) his company “will be gaining a firm foot- hold in the upper income markets in terms of product, systems and distribution channels.” Metropolitan’s sales activities are currently focused mainly on lower to middle-income earners.
Utilising broker networks
According to him, utilising the broker networks of CU Life and Protea Life in addition to Metropolitan’s own sales force will “substantially improve the distribution of our current product range.
“We will, of course, now also be able to offer a broader, more sophisticated range of financial services to our existing client base.”
Roger Wanless, managing director of CUSAF, says, given its relatively small share of the SA life assurance market, “Our strategy is to concentrate rather on consolidating our position of strength in the short-term insurance market, and expanding our operations in this arena.
“The merger of Commercial Union Insurance with General Accident Insurance is affording us even larger market share and an enhanced product base on the short term side,” he explains.
Individual life side
On the individual life side, it is expected that a project to integrate the computer systems of CU Life and Protea Life, which is currently well advanced, will be completed by the end of April.
This will ensure greater system efficiency and cost-effectiveness, and give added impetus to all future initiatives undertaken jointly with Metropolitan.
On the employee benefits side, the combined operations of Metropolitan and CU Life will be particularly well positioned to service the full spectrum of purchasers of group products. Large employers and trade unions are Metropolitan’s key areas of focus, while CU Life is more active amongst small to medium sized enterprises.
The investment management and unit trust operations of CUSAF will be fully integrated with those of their Metropolitan counterparts. Metropolitan Asset Managers (MetAm) will also manage the assets of CUSAF’S short-term insurance operations. The total combined assets under management by MetAm will be near R20 billion. It is evident that the acquisition of Protea Life had not afforded CUSAF the critical mass or resources necessary to compete effectively in the South African life market. The subsequent merger with short-term insurer General Accident, on the other hand, clearly demonstrates a preferred strength in non-life business.
Strategic initiative
From Metropolitan’s perspective, the acquisition of the 22% stake in CUSAF is “part of a strategic initiative to establish a partnership with a leading short-term insurance company through CUSAF as well as with a global insurance group through CGU plc, CUSAF’s parent company,” according to Mr Doyle.
The latter could well form the basis for an exchange of international technology, products and expertise in the future.
CGU plc was formed in 1998 by the worldwide merger of Commercial Union and General Accident, and has resulted in the formation of the largest broad-based insurer in the United Kingdom. The local operation will also undergo a name change.

Copyright © Insurance Times and Investments® Vol:12.2 1st March, 1999
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