Metropolitan Retirement Administrators launched

MRA launched as new Metropolitan business following the acquisition of the Transnet Pension Fund Administrators

Metropolitan, one of South Africa's leading black-empowered financial services groups, launched Metropolitan Retirement Administrators (MRA) on 2 April 2007, following the acquisition of Transnet Pension Fund Administrators (TPFA) from Transnet Ltd.

The highly-respected TPFA, which administered three Transnet pension funds - the Transnet Retirement Fund, the Transnet Pension Fund and the Transnet Second Defined Benefit Fund - will cease to exist following incorporation into the new Metropolitan subsidiary MRA. The acquisition adds 160 000 new members to Metropolitans existing business, which was established 12 years ago, and administers the retirement benefits of 160 000 members.

TPFA was acquired by a Metropolitan-led consortium that includes Metropolitans black economic empowerment partner, Kagiso Trust Investments (KTI), with a 20% interest. The deal was recently unconditionally approved by the Competition Commission.  There were two elements to the transaction - the first being the outsourcing of the administration of Transnets retirement funds, and the second the disposal of a non-core Transnet business, the division that handled the administration.

"The combined infrastructure of the two businesses will enable the seamless migration of members administered by TPFA into our environment," says John Melville, the Metropolitan Employee Benefits general manager who will head the newly formed MRA.

The transaction, which was finalised in March, was motivated by Transnet's stated aim to focus on its core business of rail and port infrastructure, and to dispose of its non-core businesses to companies that are leaders in the relevant markets and industries.

Melville says that TPFA was regarded with pride by Transnet, having established a solid infrastructure, which has provided a reliable bureau for employee data within the parastatal. The administrators efficient end-to-end automation of functions is well respected across the board, and its call centre and regional offices are held in high regard for their strong customer service orientation.

"This acquisition is a good fit for Metropolitan as it provides us with a springboard for greater growth in this market, and will support our initiatives to help reform the retirement fund sector." The reform process is being driven by four factors:

*  Fragmentation of the industry which currently comprises some 13 000 pension funds with a total membership of about 9-million. If the 100 largest funds are removed from the equation, the remaining entities each average only a few hundred members. Each retirement fund must secure appropriate trustee services, administrators, auditors, benefit consultants, professional experts, the structures to meet governance and other statutory requirements, as well as pay investment managers.  Members typically, therefore, suffer from inefficiencies due to lack of scale, which has a negative effect on benefits.

*  Poor governance in a number of funds, which effectively raises costs and increases risk.

*  Governments desire to address the critical issue of the significant number of people who retire with inadequate funds. Research indicates that leakage of pension fund savings is high -  more than two thirds of pension fund savings are withdrawn when people change jobs and not re-invested in other savings vehicles.

* Inadequate access to the retirement savings system by low income groups with irregular employment.

"Government has recognised that a large proportion of the population retire without sufficient money despite the fact that the industry comprises so many funds catering for millions of members. As such, the system needs to be overhauled," Melville says.

Metropolitan, using the critical mass and economies of scale that it is building, especially following the acquisition of TPFA, aims to provide good service combined with low unit costs, while focusing on continuous improvement through state-of-the-art automation and ongoing staff training.

Metropolitan was well positioned to acquire TPFA. The group is more than 100 years old and has established a solid track record as a leading provider of financial services to the emerging mass market in Southern Africa. Its black economic empowerment credentials are impeccable, having recently been ranked amongst the top 10 most empowered companies in South Africa, according to the results of the 2007 Top Empowerment Companies (TEC) survey conducted by independent empowerment ratings agency Empowerdex on behalf of the Financial Mail. 

Metropolitan's financial position is extremely strong, with capital reserves covering statutory requirements more than three and a half times, and a market capitalisation of approximately R10 billion. It has maintained a consistent brand position among the top three insurers, according to the Sunday Times/Markinor annual branding survey, in terms of awareness and customer relationship scores.

Metropolitan's track record of excellent service provision to clients, which is supported by the groups depth of expertise in employee benefits, also covers medical aid administration and managed care services. The Metropolitan Health Group is SAs largest restricted medical scheme administrator. Metropolitan also administers the Government Employees Medical Scheme (GEMS), which has enrolled over 100 000 principal members since its launch in January 2006.

Melville says that MRA is able to offer clients a number of quality services. These include a web-based function allowing members access to information and their personal details at any time. Mobile phone back-up provides additional support to the web function, the call centres and face-to-face centres. All member-oriented services are underpinned by well-configured systems that operate within a framework of electronic workflows.