Solid numbers
PSG Group subsidiary Channel Life increased its profit attributable to shareholders by 17% to R18.4m, while premium income increased by 94%, in a life insurance industry that reported an average 6% drop in premium income during 2003.
“New business flow in terms of gross premium income jumped to R825m from R424m,” reports Channel Life CE Leon de Wit.
“We have focused on getting the fundamentals right,” says de Wit, “including costs, lapses, recurring premium income, and investment performance.
"We are only interested in building a smart life office and are not looking at short-term profit opportunities. We have consciously taken a long-term sustainable profit view.
“And while some of the bigger players are reporting sluggish earnings, there is an extremely good business case to be made for the smaller specialist operators, such as Channel, who are sticking to the basics of life insurance.”
“We are more than satisfied with the progress made. Channel Life is now among the top seven general life offices in South Africa in terms of cost efficiency, with an expense to premiums ratio of 10.4%. We have managed to peg our expenses, while growing the revenue line exponentially.”
The main contributor to these solid numbers remains the wholly owned Namibian subsidiary, which has reinforced its position as a leading life office in that country.
However, the South African operation’s contribution is growing steadily after the successful re-engineering of its predecessor, Anchor Life.
De Wit says that they experienced a strong inflow of single premium investment business in South Africa, an area where other life offices are reportedly suffering. This has been made possible by innovative product design and unique marketing techniques. Group risk premium business also grew strongly.
One blemish on the results, and it was felt by all industry players, is the number of policy surrenders during the period under review.
“While our lapse ratio continued its downward trend and has now reached a very pleasing 11%, we lost nearly 15% of our policies during the year due to policy surrenders,” says de Wit.
“Our research showed that in the majority of cases it was due to personal financial difficulties of our clients, and nothing associated with our business. This is disturbing, none the less, since it seems that individuals are becoming less inclined to commit to long-term savings.”
On the road ahead, De Wit says that Channel’s focus for 2004 is squarely on growing its traditional life assurance business for individuals.
“Our chosen market is below that of most other life offices in terms of family income, and we are building sustainable distribution partners in those markets. Our recently acquired BEE credentials are coming in handy.”
