New kid on the block keen to shake up the African actuarial industry

The merger of two complementary mid-tier South African firms into ARGEN Actuarial Solutions has created a new large actuarial firm with some appealing features.

On 1 March 2014, independent South African actuarial firms Arthur Els & Associates (AE&A) and Genesis Actuarial Solutions merged to form ARGEN Actuarial Solutions – two specialist actuarial companies coming together to create one of the largest independent actuarial firms in Africa. Started in 2004 by Arthur Els, one of only a few Certified Enterprise Risk Actuaries in South Africa, AE&A specialised in the valuation of retirement funds, preparation of accounting disclosure for companies' employee-benefit arrangements, asset-liability modelling, providing actuarial services to retirement funds and enterprise risk management. Francois Rosslee and Tommie Doubell established Genesis in 2000, originally to provide actuarial calculations for the United Kingdom Pensions Review. Its flexible, independent team of actuaries provided pension fund services, but also became expert in individual calculations for Road Accident Fund claims amongst others, and in providing outsourced support for administrators and other actuarial firms as required.

Through Argen, both companies will be able to offer a broader pool of actuaries and a wider range of services. This, combined with the fact that the firm is committed to playing an independent but supportive role to retirement funds and advisors, and the fact that they have significant African experience between them make them an appealing alternative to other large groupings of actuaries who are in the main “attached” to firms who provide fund investment advice as well.

“The nice thing about the merger is that the two companies do different things in different actuarial fields, so there are no retrenchments, or closing of offices – it really is a pure merger that will generate synergy. It’s hard for an actuary to accept it, but in this case, one and one adds to more than two!” says Francois Rosslee, who will act as Director of the new venture.

Arthur Els agrees “So we can now offer new services to former Arthur Els & Associates clients, and vice-versa, as far as Genesis goes. There were a couple of reasons for the merger, but primarily, it allows us to create a deeper pool of actuaries, more security and a wider service offering to clients, and a significant African platform. In AE&A we had two actuaries, with a large client base – we needed more resources and more actuaries to grow our Retirement Fund support business. Joining with Genesis also allows us to specialise and aids succession planning. The third thing encouraging the merger was to reward the wonderful people we work with. The new and larger business gives then more scope to build careers and it gives them greater security of employment as well.”

Els is also excited by the prospect of attracting more large clients, given ARGEN’s new complementary capacity. “It enables us to become a credible competitor in the market,” he says. “As two separate mid-size companies, you exist, but you’re never going to be serious competition for the big boys. We did (and do) have big clients – Group 5, Sasol, Altron, SALA for example – but it’s securing new big clients that is always difficult. It’s easier for us to compete with them, now that we’re a bigger company.”

Ethics, expansion

Thulani Nxumalo, chairman of ARGEN, believes that the firm’s independent status – and its size – give it an ethical edge, in certain areas of operation. “Many of the larger actuarial firms, by way of example, are linked in some way or another to the people administering retirement funds,” he says. “There’s nothing wrong with that in law, and I wouldn’t imagine or suggest that any of them ignore the potential for conflicts of interest that might arise, but at the same time, it’s just good governance: you don’t let the people writing the exam mark the paper. Simply put, by being an independent concern with no links to any of the funds we’re servicing, but at the same time being big enough to handle large clients, our independence is a de facto guarantee of our impartiality.”

The company has an active commitment to B-BBEE codes and social development, donating annually to bursaries that provide tertiary education for disadvantaged students. ARGEN is classified as a Level 2 B-BBEE contributor in terms of the Codes of Good Practice promulgated by the Department of Trade and Industry. Clients can claim 125% of the firm’s fees as procurement from a B-BBEE service provider.

By blending both its parent companies’ assets, ARGEN now has offices in Centurion, Johannesburg, Kroonstad and Namibia, with plans to open a Cape Town office within the next few years. It will also continue expanding its operations into the rest of Africa, taking advantage of actuarial opportunities created by the continent’s development boom and growing consumer market. “AE&A was already established in Namibia and Malawi, while Genesis had operations in Tanzania, Kenya and Uganda, and we were also doing business in the DRC and Nigeria, so the merger immediately expanded ARGEN’s footprint into the rest of Africa, and we will be working actively to expand this” says Tommie Doubell, who is leading the African development of the business.

Creative innovation

Els credits the merger with re-energising both teams. “Arthur Els and Associates was a lovely company to work in, but we were getting staid,” he says. “This has generated a whole new hype in the business – and they’re experiencing the same in the Genesis team too. There’s a whole new ‘let’s get going’ atmosphere. Both companies have always relied on both their accuracy and their efficiency and their innovative interpretation of the numbers to create solutions. Doubell quips “I’ve already had a client say, ‘The great thing about Arthur is that if he comes with a problem, he already has a solution to suggest’. Finding those innovative solutions is one of our strengths.”

Warming to his theme that great actuarial solutions require both precision and creativity, Els explains: “They say that when Einstein was working on the Theory of Relativity, he was actually pipped on the maths – a French mathematician beat him in working out the relevant formulas. But the Frenchman didn’t know what to do with that maths; it took Einstein’s creative ability to use those formulas and apply them to explain relativity, before the maths was of any use. I see that our main competitive advantage draws on that example. Our independence allows us to take the creative solutions leap without breaching the Chinese walls between administrators and internal actuaries: we go beyond saying, ‘There are the facts’ – we’re able to interpret them in a way that shows the best course for the client to follow. As our new slogan says; it’s where precision meets innovation.”