31 MARCH 2015ALEXANDER FORBES GROUP HOLDINGS LIMITEDINTEGRATED ANNUAL REPORT

OPERATIONAL PERFORMANCE REVIEW

AFRINET

Performance indicators

 

2014/15

2013/14

2012/13

2014 – 2015
% change

Headcount

373

334

312

12

Employee engagement rate (%)

65

59

n/a

10

Customer satisfaction index (%)

82

n/a

n/a

Net operating income (Rm)

291

249

202

17

Recurring revenue (%)

85

72

71

18

Profit from operations (Rm)

60

48

36*

25

Gross written premium (Rm)

212

166

136

28

Number of members under administration

381 592

351 796

322 128

8

Alexander Forbes Insurance Namibia number of policies

11 594

9 149

7 474

27

Investment Solutions Namibia assets under management (Rbn)

3.3

2.6

2.3

27

*Restated

Highlights

Challenges

  • Doubled contribution to group net operating income and profit from operations over the past three years
  • Sourcing senior-level, locally-based employees who are skilled in managing within the context of an increasingly regulated financial services environment
  • Profit from operations increased by 25%
  • Rising costs associated with compliance, risk and governance
  • Success in establishing and building a retail business that contributed 13% to net operating income over the last three years
  • Delays in the promulgation of legislation (as our business model is primarily compulsion-based)

 

overview

Since 2011/2012, AfriNet has doubled its contribution to group net operating income and profit from operations.

In 2014/15 the division achieved net operating income growth of 17%, an increase from R249 million the previous year to R291 million. Operating profit rose from R48 million in 2013/14 to R60 million – a 25% rise. In four years, the business which delivers the group’s suite of services in Africa outside of South Africa, has achieved a net income compound annual growth rate of 17%.

Perhaps most significantly, unlike its competitors, AfriNet has achieved this growth organically without, in any instance, resorting to costly acquisitions.

In support of the group’s strategic intent of leveraging our core business to grow outside of South Africa, this year AfriNet’s headcount grew by 10% or 34 positions. Despite the increase in personnel costs, overall margin improved from 19.4% in 2012/13 to 21%.

retail growth

Whereas, two years ago, AfriNet was a purely institution-focused business, this year retail represented 13% of total net operating income, a figure that is set to increase in 2015/16. The business’ retail performance was achieved through retail pilots which leveraged the existing infrastructure and Alexander Forbes brand.

A key achievement of the year reported on was growing new capabilities to service the increasing demand in Namibia, Botswana, Kenya and other countries for those financial services in which the South African operations of Alexander Forbes are an acknowledged leader.

The business’ achievements in various fields of operation are indicative of the extent to which the Alexander Forbes culture, values and operating models are being successfully and profitably replicated by nationals of these countries, and of the sustainability of the group’s Africa strategic intent.

investing in people

Over the past two years, 10% of all AfriNet employees underwent immersive training (mostly in retail products, systems and marketing) in Johannesburg. In 2014/15, management focused closely on aligning the AfriNet culture with that of the group. Employees responded positively this year to their greater inclusion in the affairs of the group, and our employee engagement rate rose from 59% in 2013/14 to 64.5%.

As well as aligning employees with the Alexander Forbes employee value proposition, considerable success was achieved in replicating group governance and risk management policies, procedures and standards in each of the AfriNet operations. This raises accountability and transparency within the group. Another area of achievement was in the application of Alexander Forbes’ IT capability, which holds the promise of improving customer service while enhancing the brand.

Governance and brand value are of utmost importance in relatively small but potentially lucrative markets such as those in which legislated pension reform is fast taking root. In each of AfriNet’s key markets the reform process is still in its nascent stage. The expected acceleration of this process will represent a very solid opportunity to grow value in those Anglophone countries in which the business has an established presence.

Outlook

The pension reform wave is rapidly gathering pace in the relatively well-regulated countries in which AfriNet has an established and valued market presence and brand. As this wave gathers momentum, the business’s prospects remain buoyant. Leveraging opportunities will continue to demand investment in skills development, recruitment, marketing, IT systems and infrastructure.

Product and offering diversification will be accelerated, with our retail offering, in particular, expected to build on recent successes.