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A solid foundation

02 May 2006 Angelo Coppola

A very successful campaign to increase new recurring business and an emphasis on embedded value growth have been the main drivers for Channel Life in the last financial year, confirms Ren Otto, CEO of Channel Life.

*Embedded value increased by 71,4% from R161m to R276m

*Embedded value per share grew by 32% from 91c to 120c

*Embedded value earnings increased by 148,9% from R26,8m to R66,7m

*Embedded value earnings yield increased by 115,8% from 19% to 41%

*Gross assets grew by 105% from R2 096m to R4 298m

*Gross premium income up by 18,3% from R1 038m to R1 228m

*Attributable earnings increased by 77,7% from R17,5m to R31,1m

*ROE grew by 7,9% from 24,1% to 26%

*CAR ratio favourable at 160%

Not only have the core earnings for the year increased, but we also invested heavily in a range of new initiatives and channels in the first half of the year that have begun to reap rewards in the second half.

New recurring business was enhanced substantially, by the introduction of four additional distribution channels - Channel2U, an in-house call-centre, Channel4Life referral marketing business, Alternative Channel institutional and retail investment business and Channel South broker distribution.

These are now fully established and delivering good volumes of business, well above expectations. It is significant to note that our retail recurring premium book is 44% bigger than it was 12 months ago.

"This growth is viewed as indicative that the entry level market is responding positively to Channel Lifes products and services. The experience is encouraging, especially in the light of our vision to Africanise the industry.

Otto also confirmed that Channel Life was close to being ranked the sixth largest life insurer in the country in terms of balance sheet size and premium income. Not bad for a company that was ranked 40th, just five years ago, he quipped.

Other highlights of the year included the renewal of the Capitec bancassurance relationship for another three years and the acquisition of the Rentmeester book from Capital Alliance.

The conversion of those books onto the Alfinanz platform added over 350 000 lives and has almost been completed.

Turning to the new majority shareholder, Otto confirmed that as of January, Sanlam had become a majority shareholder in Channel Life.

The deal was concluded at an effective price of R1,25 per share, with Channel valued at R230m for this purpose, which reflected a premium of 38% above Channels embedded value.

In the process, Channel became a 55% shareholder in Safrican Life, partnering with Thebe to create the countrys largest black-owned life office.

Asked whether the new shareholder would have any effect on the plans to list the business in 2007, Otto explained that Sanlam had the right to make an offer to all other shareholders, provided that such an offer is made and accepted prior to 31 December 2007, failing which, Channel will list publicly on the main board of the JSE.

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Do you believe this is the toughest period for financial advice in many years?

ANSWER

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