Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

NEW ZIMELE-AP­PROVED in­sur­ance prod­ucts for the lower in­come mar­ket will change the way South Africa’s life com­pa­nies do busi­ness. Who is best placed to ben­e­fit? It will ul­ti­mately come down to which com­pany has the most ef­fi­cient, cost- ef­fec­tive dis­tri­bu­tion sys­tem. Profit mar­gins on the Zimele prod­ucts are wafer thin and bro­ker com­mis­sions will be much smaller, prob­a­bly rul­ing out the tra­di­tional bro­ker net­work.

Some life com­pa­nies will rely on bank part­ner branch net­works, and groups such as Hol­lard have been quite in­no­va­tive in mov­ing “ starter pack” in­sur­ance through Pep Stores.

How­ever, our money is on Metropoli­tan Life. Us­ing a dual approach of di­rect mar­ket­ing and a com­bi­na­tion of agents in the field who re­fer clients back to a call cen­tre, they seem to have the dis­tri­bu­tion net­work right. And they also have a lot of brand cred­i­bil­ity in this mar­ket. OP­POR­TU­NI­TIES • The share has one of the low­est rat­ings in the sec­tor and trades at a dis­count to embed­ded value, sig­ni­fy­ing up­side po­ten­tial if Metropoli­tan gets Zimele right. • Up to 95% of poli­cies are be­ing is­sued over the phone

and pro­cessed within 24 hours. RISKS • Growth in new busi­ness comes at a cost. In­terim re­sults showed the new re­tail busi­ness mar­gin down to 8,2% and the lapse rate at nearly 16%. Watch those trends when an­nual re­sults come out next week. • Long- time CEO Peter Doyle re­tires in a year’s time.


Source: I-Net Bridge

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