Alexander Forbes sells its short-term insurance business to Momentum Metropolitan

CFO Bruce Bydawell says the disposal will keep Alexander Forbes capital-light and focused on what it does best.

This, he says, goes against what the shareholders want from the company, which is to stay “capital-light and focused on what we do best, to provide advice-led integrated retirement solutions and holistic wealth management.

Alexander Forbes Group Holdings has announced that it has reached an agreement on the sale of its short-term insurance business (AFI) in South Africa to Momentum Metropolitan Strategic Investments (MMSI) for R1.938 billion. 

In a statement released by the company, Alexander Forbes said that the conclusion of the sale is subject to regulatory approvals, including the Competition Commission

Alexander Forbes CEO Dawie de Villiers said that the disposal of the insurance business was announced as part of the strategic review in March 2019, following a rigorous, impartial and transparent process. 

In an earlier interview with CFO Magazine, Alexander Forbes CFO Bruce Bydawell (pictured) told CFO South Africa about the process of the acquisition, saying: 

“It’s been a totally open and well-governed disposal process. We put out an information memorandum to a number of interested parties. It is a great asset, and we were pleased with the interest shown… Part of the discussion was around what they are planning to do with our staff and clients because we’ve made it very clear the protection of these stakeholders is high on our agenda.” 

The decision to move away from insurance was not an easy one, he said, mentioning that the business has delivered growth in the past with good prospects. “But essentially, we were a small fish in a very big pond with lots of regulatory requirements becoming the norm in this industry. If we were to carry on with the business – which has only 3 percent of the market – we would have had to invest substantially in systems and people, and we would be playing against some of the very much bigger players with bigger balance sheets.”

This, he says, goes against what the shareholders want from the company, which is to stay “capital-light and focused on what we do best, to provide advice-led integrated retirement solutions and holistic wealth management. Since our delisting in the private equity days, we’ve done a number of corporate transactions, but there’s a lot of complexity in everything that we’ve done, and now it’s time to simplify, refocus our efforts on the core businesses and grow from there.”

Bruce explained that the sale not only benefits Alexander Forbes by realising value for its shareholders but also balances appropriate solutions for clients while protecting and valuing the employees. 

“The transaction consideration reflects the quality of the business and the value that Momentum Metropolitan places on the clients, employees and management team,” de Villiers said. 

De Villiers also said that a priority in selecting Momentum Metropolitan was to ensure Alexander Forbes’ clients would continue to experience the superior benefits and service excellence they have at the company. “We have selected a company that understands the value of proposition provided to our clients and will continue to invest in enhancing it,” he said. 

The statement read that in line with its strategic objective to remain capital-light, surplus cash realised from the sale of AFI will be returned to shareholders after taking cognisance of the investment needs of the company. 

“The disposal of AFI delivers on the implementation of the company’s strategy, which reaffirms Alexander Forbes’s strength as a trusted advisor to our clients, with a renewed focus on the core businesses of consulting, administration and investments.”

The full interview with Bruce Bydawell will appear in the Q4 edition of CFO Magazine, which will be launched online next week.