The big time beckons...

Channel Life enters the big league as Sanlam takes a majority stake in this leader in the lower end of the life insurance sector, known for their efforts to “Africanise” the industry.

The recently announced investment by Sanlam into Channel Life has put the cat amongst the pigeons, as the lower end life insurance leader is set to challenge its competitors. This follows the news that Sanlam has acquired 100% of African Life.

According to Sanlam they see the Channel Life direct approach as complimentary to the African Life brokers and advisors distribution network.

A Sanlam spokesperson says that while Channel Life, African Life and Safrican may compete for clients, they are comfortable with the healthy competition where different brands are involved.

The announcement is exciting news in that it now confirms that Channel Life is knocking at the door of a top six place on the life insurance table. “As it is, we are leaders in the lower end of the market and operating in a space that Sanlam doesn’t have a real presence, so the complementary synergies are obvious,” says Channel Life CEO, René Otto.

Sanlam identified Channel Life as a rapidly growing entity with a strong focus on the entry-level market. The strength of Channel Life’s direct marketing methods and skills, the strong and experienced management team and increased product range resulted in good growth over the past couple of years.

The transaction was also a win for the management of Channel Life, in that they maintain operational control until at least late 2007, when a planned listing has been penciled in.

“The listing should go ahead, unless Sanlam (or any other interested party), buys out the minorities. This may affect any listing plans,” explains Otto. “We regard it a complement that Sanlam recognised management as a key component in the deal and with Sanlam’s faith in our management, we can continue to roll out the Channel Life successful business model.

“Added to this, Channel’s brand and market positioning remains in place. Given the potential synergies between the two companies, this is truly a win-win deal.”

The deal has been in the pipeline for close to nine months and initially Channel Life was more focused on growing their business and market share, than on any thoughts of selling. “And that is what Sanlam has purchased,” explains Leon de Wit, Chairman of the Board of Channel Life, “a growth opportunity”.

“We have moved from last position on the competitor list, a little over five years ago, to top 10 player today, all because we have adopted a simple business model, which is aimed at the low income market.”

Otto says that theirs is a black-focused business, which is African by nature and by product design. “We have created a niche for ourselves and we are successfully offering affordable and appropriate products for our market.

“The credibility that Sanlam brings to the table will strengthen Channel in many ways. Added to this, the company will continue to benefit from the PSG Group’s entrepreneurial influence. It is testimony to Channel Life that the existing shareholders insisted on continuing their interests.”

In terms of the structure of the deal, De Wit says that there were two parts to the transaction. Firstly, there was the purchase of a majority stake by Sanlam and secondly Channel Life acquired Safrican from Sanlam. The other 45% of Safrican is owned by Thebe.

“Safrican, with Nthabiseng Mmatli at the head of the business, operates in the same market as Channel and becomes a 55%-owned subsidiary of Channel Life, as of 1 August, all of course subject to regulatory approval.”