King Price takes Stangen as a queen

CEO sees potential in ready-made life insurance opportunity

● In its first move into life cover, King Price has concluded a R140m deal to acquire Stangen from African Phoenix, the short-term insurer’s CEO Gideon Galloway told Business Times this week.

Galloway says moving his business into life insurance has always been part of the plan.

“We believe that the acquisition of an existing niche life insurance business will provide numerous benefits, starting with reducing the amount of time and funding needed to establish a life insurance business from scratch,” he says.

“Stangen is a great fit for King Price,” he says, adding that some members of the company’s management team had been involved in the life business before.

Half a decade ago, Stangen was the credit life-cover supplier to African Bank’s clients. But that was before the microlender had to be rescued by the Reserve Bank after an unsecured lending binge.

In fact, Stangen had been part of African Bank Investments Ltd and had been the most robust part of the group’s operations.

The business ended up in African Phoenix Investments, but did not fit in with the group’s plans to build a portfolio of private equity investments and rejig itself into an investment group.

King Price was one of several potential bidders interested in Stangen.

Since African Bank’s rescue, Stangen has had to look beyond credit life products tied to unsecured loans and now has 55,000 clients split between full life cover, credit life insurance and funeral policies. Funeral cover is now the largest part of Stangen’s book.

Galloway sees ample opportunity for growth by using its direct sales model to flog life insurance — a market of R300bn.

“Life insurance is three times the size of short-term,” he says.

He wants life products to contribute more than half of King Price’s revenue by the end of the next decade.

Johannesburg-based Stangen employs about 150 people and has spent a substantial amount to upgrade its systems over the past three years, says MD Marius Botha.

And the cloud-based systems with the ability to do much of the paperwork required for life insurance online were a big selling point for Galloway.

“We will keep the Stangen brand and our plan is to have the business profitable in the next 12 months.

“After that we will launch King Price Life,” he says.

Earlier this year, King Price also eyed Alexander Forbes’s short-term insurance assets as part of its strategy to build scale through acquisitions.

Not that King Price’s organic growth is feeble by any measure. The Pretoria-based company grew sales 40% last year, says Galloway.

We will keep the Stangen brand and our plan is to have the business profitable in the next 12 months. After that we will launch King Price Life Gideon Galloway

CEO, King Price