Inside the fix up at Alex Forbes

About a year into the job, Alexander Forbes CEO Andrew Darfoor is finding it hard to bring the group’s disparate fleet of aircraft back into formation.

The original Forbes business of consultants and actuaries showed no growth in profit in the six months to September 2017, while its foray into the rest of Africa provided limited rewards — the profit of its rather grandly named Emerging Markets unit was down more than R16m to R3m, barely enough to pay the travel costs to these countries. In particular, income from Botswana fell by 23% as the company lost its dominant client in the country, the Botswana Public Officers Pension Fund.

Darfoor has staked his reputation on creating a globally distinctive pan-African group. He says three countries make strategic sense for expansion: Morocco, Ghana (his home country) and Nigeria, where the group has a token presence.

But he is not averse to using his Rolodex to seek help outside Africa.

The head of the institutional business, which has been vacant all year, will be taken up by Tony Powis, who was head of Willis Employee Benefits in the UK. He will be in charge of rolling out Forbes’s range of so-called financial wellbeing products, retail protection and investment products tailored for the 1.4m Forbes clients.

The company has also announced the appointment of John Mather as its new chief information officer. He was previously chief information officer of Canada’s ManuLife.

Darfoor says these appointments do
not mean that Forbes is not committed to
transformation.

"I would like to see our experienced sector leaders mentor the top 30 to 50 promising black executives," he says. "This will be more effective than promoting and overpaying people before they are ready to take the job."

Darfoor’s financial scorecard at least has some successes. The dry-as-dust group risk unit, which sells death and disability cover to pension funds, was the star performer. Its gross written premium was up 22% to R245m in spite of competition from the life offices, with their bigger balance sheets. Its operating income was up 31% and operating profit was up 57%.

Another big winner was the retirement unit, which revolves around the Forbes umbrella fund, where operating profit was up 22%.

There has been innovation in this sector, with products such as the low-cost Core Plan and AF Access fund targeted at intermediaries.

Darfoor says he hopes to get a higher market share of retirement money, and is already ahead of projections, having persuaded 57% of clients to preserve their pension on retirement and 42% to go into Alexander Forbes products.

Darfoor hopes to do even better as the group rolls out its new values of caring and learning. It will be quite an adjustment, as piranhas used to flee from Forbes executives.

One group Darfoor would like to woo is independent financial advisers (IFAs). He admits Forbes and IFAs used to go together like oil and water, but there is a good chance that at least 150 IFA practices will start to distribute Forbes products under a new programme. Though the IFAs in the programme will not be obliged to sell Forbes products, Darfoor says they will be working within an advice framework compatible with the Forbes product set.

Forbes’s own internal retail distribution, now called Wealth & Investments, has never achieved the potential you might expect from its parentage. Over the six months wealth profits fell by 3% to R171m, though to be fair it is the largest business unit in the group. It includes the last remaining northern hemisphere business, the Channel Islands investment administration shop.

The big success in retail was insurance, now run on a combined basis under former Assupol boss Rudi Schmidt. Darfoor says he is very pleased that the business is being run by a career insurance man.

Gross written premiums on the short-term side was up 5% to R793m, making it a good midsized player, and the loss ratio fell from 74.1% to 67.3%. AF Life, though, remains subscale — even with a 57% increase in sales. It still accounts for only 1% of retail operating income.

A crucial element of Forbes’s success will be the rebranding of its Investment Solutions business. Darfoor only had to look as far as the Momentum offices in Centurion to find its new boss, Leon Greyling — no work permits required.

Greyling has been charged with turning what is now called Alexander Forbes Investments from a peer performance-focused manager to an outcomes-focused one. His division attracted modest net cash flows of about R200m. Profit was flat at R152m, but there will be benefits from closer ties to the rest of the group.

Darfoor is irritated at the share price, saying it does not reflect the value of the business.

What CEO wouldn’t say that? But it is fair to say that a premium of 20% to net asset value is not demanding, given the value of the brand and the longevity of its clients.