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Who are we

How we create value

Our strategy

Performance review

Annual financial statements

About this report

Our investment thesis

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Message from the chairman

Given what was a particularly challenging operating environment, the Alexander Forbes group’s overall performance for the 2017 financial year was satisfactory. It was a year of transition for the group. We welcomed our new chief executive as well as several other senior leaders across the business. We refreshed our strategy and ambition under what we are calling Ambition 2022. We aligned our investment plans to the strategy and embarked on a comprehensive technology and digital modernisation programme. I believe we now have a very solid platform for growth, with detailed plans and performance indicators for execution against our strategy.

Our performance in 2017

The unexpected global economic and political outcomes of 2016/17 caused considerable market instability and volatility. These events, coupled with local political disquiet, made it a challenging year for the financial services sector domestically. The pro-Brexit vote and President Trump’s economic policies have negatively impacted the South African economy. More critically, South Africa itself is in a state of transition. The upsurge in political activism through focused campaigns at tertiary educational institutions and in civil society, the recall from office of Treasury officials and the lack of clarity around government policy have resulted in uncertainty around the country’s macroeconomic outlook. The result was the downgrading of the country’s credit rating. The financial services industry is acutely sensitive to these macroeconomic factors, and the political and economic turmoil has contributed to a very tough trading environment across most sectors.

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Sello Moloko
Non-Executive chairman

Our structure and geographic presence

Alexander Forbes offers integrated retirement, investment, life and insurance solutions to create, grow and protect our clients’ wealth and assets. The group structure was revised and simplified during the year under review. It now consists of:

  • Three core verticals supporting a ‘vertically integrated’ customer proposition with increased collaboration
  • Two core group functions to promote better efficiency, standardisation and cost optimisation

Alexander Forbes Group

Institutional clients

Consulting
Retirements
Investments
Group risk

Retail clients

Wealth and investments
Retail insurance

Emerging markets

Southern Africa (Namibia, Botswana)
Eastern Africa (Uganda and Zambia)
Western Africa (Nigeria)

Products and services

  • Standalone and umbrella retirement fund administration and consulting
  • Retirement fund and health actuarial consulting
  • Asset and investment consulting and administration
  • Beneficiary fund consulting and administration
  • Investment manager surveys
  • Multi-manager portfolio construction, manager research and advice
  • Health and medical scheme consulting, and absenteeism and disability reporting, management and consulting
  • Group risk insurance
  • Investment management administration services

Products and services

  • Multi-manager portfolio construction, manager research and advice
  • Individual financial planning, wealth management, savings and investment product administration
  • Bespoke investment portfolios for independent financial advisers (IFAs)
  • White-labelled investment portfolios
  • Retail umbrella fund
  • Short-term insurance
  • Long-term insurance

Products and services

  • Standalone and umbrella retirement fund administration and consulting
  • Actuarial consulting
  • Asset and investment consulting
  • Retail offering including short-term insurance, financial planning consulting and retail umbrella funds for savings
  • Multi-manager portfolio management, manager monitoring and consulting

Clients

  • Retirement funds
  • Corporates
  • Public sector
  • Medical schemes
  • Unions and organised labour
  • Small- to medium-sized enterprises (SMEs)

Clients

  • Individuals

Clients

  • Retirement funds
  • Corporates
  • SMEs
  • Public sector
  • Individuals

Group Operations, Technology and IT | Group Shared Services

Our investment Thesis

Continued growth in operating income and profit

1

Predictable and recurring revenue stream

2

Trusted brand

3

Strong strategic partners

4

Cash generative with high dividend yield

5

Capital ‘lite’ balance sheet

6
  • Operating income from continued operations
    • five-year CAGR of 7.5% to March 2017
  • Operating profit before non-trading and capital items
    • five-year CAGR of 5.2%
  • Last 12 months’ trading
    • 1.2% growth in operating income
    • 0.5% growth in operating expenses
    • 3.1% growth in profit from operations
    • 0.7% operating leverage
  • Client retention in the high 90s

Institutional


  • 63% fee and commission income from consulting and administration
  • 34% from investment activities
  • 3% from insurance activities

Retail


  • 60% fee and commission income from consulting and administration
  • 29% from investment activities
  • 11% from insurance activities
  • Market leader across our core institutional clients business
  • Prioritisation of clients at the core of the business strategy
  • Service excellence:
    • 10th consecutive PMR.africa Diamond Arrow Award in consulting and in administration
    • Winner of the Africa Best Employer Brand
  • Partnerships with Mercer and African Rainbow Capital (ARC) provide opportunities for growth
  • Having ARC as a shareholder provides opportunity to enhance our growth prospects through deal flow and collaborative development
  • We recently launched the Alexander Forbes Mercer Investments joint venture. This co-ordinated approach to our investment solutions will greatly enhance our global portfolios as well as our local offering for our clients
  • High cash conversion ratio
  • Collection of cash largely under our control
  • Investment in growth strategies mainly through the income statement
  • Dividend cover of 1.5x
  • Declared an interim dividend of R228 million (17 cents per share) and a final dividend of R309 million (23 cents per share)
  • Declared a special dividend of R309 million (23 cents per share)
  • Group solvency capital requirement of R1.1 billion
  • Normalised return on total net asset value: 35.2%
  • Normalised return on capital employed: 15.7%

Performance review

Clients

Our clients are the cornerstone of our strategy: they buy our advice-led solutions and provide our revenue

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Employees

Our employees are critical to fulfilling our commitment to our clients

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Investors

The Alexander Forbes board takes overall responsibility for investor relationships, ensuring investors have a sound understanding of the group’s value

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Society

We are committed to being a responsible corporate citizen with regard to our community, our society and our environment

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Talking of one

Alexander Forbes’s vision is to be a globally distinctive pan-African financial services leader. During 2017 we launched Ambition 2022, our refreshed five-year strategy that aims to achieve our vision with a client-centric model focused on helping our clients secure their lifetime of financial well-being. In order to reach our goals we need to come together as one, combining our efforts seamlessly across the group to create value for all of our stakeholders.

Our collective power as a leaner, more focused group is the force we need to deliver financial well-being to our clients. It’s time to believe in the power of one.

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