Alexander Forbes leaps more than 15% on insurance unit talks

Shares in Alexander Forbes jumped as much as 15.1% to R6.11 on Thursday morning — the best level since June 2018 — following news that it could fetch at least R2bn from the sale of its short-term insurance business.

The financial services group, which has a market capitalisation of about R8bn, said in March it planned to sell its insurance businesses amid a shift in strategy towards an “advice-led and capital-light model”.

The pension fund administrator said at the time it would look for a buyer for its group risk, retail life and short-term insurance units.

On Tuesday, insurer King Price said it was willing to offer up to R2bn for Alexander Forbes’s short-term insurance business alone. The mooted deal would double King Price’s existing business, said CEO Gideon Galloway.

Galloway said that since King Price only played in the short-term market, the businesses were a "perfect fit".

At 11.38am on Thursday, Alexander Forbes’s shares were at R6.05, a 13.9% increase on the day.

Gryphon Asset Management portfolio manager Casparus Treurnicht said the share was probably reacting to the announcement by King Price.

Alexander Forbes’s insurance businesses generated R1.3bn in revenue in the six months ended September 2018, versus total revenue of R3.4bn.

The group said in March it would return surplus capital to shareholders "taking cognisance of potential investment opportunities that lie ahead".

Alexander Forbes said at the time it wanted to grow its consulting, administration and investments businesses by acquiring a “similar focused employee benefit business that supports our strategy”.

Group CEO Dawie de Villiers said the group’s strategic review of its businesses would “accelerate the competitive position we already occupy in our core business of consulting, administration and investments”.

hedleyn@businesslive.co.za