King Price sees quick way to get to king size

● King Price Insurance has put in a bid for some of Alexander Forbes’s insurance assets which, if successful, would double the size of its business, King Price CEO Gideon Galloway told Business Times.

Galloway said the price would be more than R1bn.

Alexander Forbes, a financial services group that has a strong presence in retirement-fund administration and employee benefits, announced last month it was seeking a buyer for its insurance businesses.

The portfolio on sale includes life insurance and group risk too, but it’s the short-term insurance book Galloway and his company are after.

In seven years King Price has grown to selling 12,000 policies a month with annual sales estimated to reach around R1.8bn this year, Galloway said. Buying Alexander Forbes’s short-term assets would instantly double King Price’s size and would help it leapfrog about three years of development, he said.

“It’s a perfect fit for us. They have branches we can use. We can put our tech into their system and use our marketing channels to grow the business,” Galloway said.

SA’s short-term insurance space is highly contested. In a feeble economy, the only real growth strategy for insurance providers is to poach clients from other players, which Galloway calls a “competitive bar-fight”. Short-term specialists Santam, Old Mutual Insure, Auto & General and Outsurance compete against each other and against the big banks.

Alexander Forbes’s push into short-term insurance met resistance from shareholders. CEO Andrew Darfoor was fired last year and his replacement, Dawie de Villiers, said the company’s strategy would be an “advice-led and capital-light model”.

Though the company built a short-term insurance business with revenues of R1.3bn for the latest half-year to end September, the new strategy means it wants to let go of it.

“A new owner will be able to continue its success and fuel future growth through additional investment,” Alexander Forbes said.

Alexander Forbes is also shopping for more employee-benefits assets. An executive with knowledge of the market told Business Times that the short-term insurance business on sale would appeal to Santam and King Price, but that the latter would probably be willing to pay more for it.

The executive said Alexander Forbes would need to spend at least R1bn to modernise its systems to compete with the rest of the short-term insurance market and would be better off if it sold the business. Galloway agreed with the executive’s estimate of how much investment was needed. He was waiting to see Alexander Forbes’s books. King Price, in which investment group Mertech has a 60% stake, is ungeared — a lever it could use to raise the funds for an acquisition, Galloway said.

It’s a perfect fit for us. They have branches we can use

Gideon Galloway

CEO, King Price