Feisty short-term insurer King Price has thrown its hat in the ring and offered up to R2 billion to acquire 100% of Alexander Forbes’s short-term insurance business.
If successful, the bid would double King Price’s existing business, says CEO Gideon Galloway. King Price, which was founded seven years ago, currently sells around 12 000 policies a month and, as at the end of its 2019 financial year in June, will see annual premiums of R1.8 billion.
The Alexander Forbes business is a similar size. According to its last published annual results, gross premiums in the short-term insurance business realised R1.6 billion for the year to March 2018.
Alexander Forbes is in a closed period ahead of the publication of its results in June and could not comment. However, the company disclosed in March that it would dispose of its group risk, retail life, and short-term insurance businesses as part of its restructuring effort. The new focus will see consulting, investments and administration as the key drivers of growth.
For the various players in the short-term insurance industry, an asset of the quality of Alex Forbes’s on the chopping block is like manna from heaven. The industry is struggling to grow organically as new clients are few and far between and existing clients are falling off the bus as consumers juggle their financial responsibilities.
“It’s not every day a company this size is up for sale,” says Galloway. “It has great people, a highly-desirable client set, and a solid branch infrastructure. We think this will be a good fit with our business which sees us selling 70% of policies direct and 30% via brokers.”
In addition, King Price plays only in the short-term insurance market, which makes it ‘the perfect fit’ for the Alexander Forbes short-term assets as it would not compete with Alexander Forbes in any other market segment.
However, Sanlam subsidiary Santam, the biggest short-term insurer in the country, is also reported to be bidding for the assets. Other players like Hollard, Outsurance, Discovery and Old Mutual Insurance have not yet revealed their hands.
The deadline for the first round of the open bidding process is the end of April. From there it is assumed that a shortlist will be selected and further due diligence ensue.
King Price entered the highly competitive South African insurance market in June 2012. Investors in the company include reinsurance giant Munich Re and private investment company Mertech. The insurance model is unusual in SA in that it automatically decreases comprehensive car premiums monthly in line with the cars’ depreciating values.
Since its inception, King Price has expanded its personal lines products to include cover for other personal effects, launched a successful business insurance division, and established a business in Namibia.
Galloway says one of the company’s key differentiators has been its use of data analytics and technology to streamline its processes and deliver better service and prices to its customers. This technology would “transform” the Alexander Forbes short-term book and open significant growth opportunities, he said.