ALEXANDER FORBES financial services

Performance indicators





2014 – 2015
% change

Headcount (permanent employees)

1 897

1 789

1 666*


Employee turnover (%) (permanent employees)





Employee engagement rate (%)





Net operating income (Rm)

1 852

1 700

1 537


Recurring revenue (%)




Profit from operations (Rm)





Number of standalone retirement funds





Standalone retirement fund assets under administration (Rbn)





Number of umbrella corporate clients(1)

1 144

1 031



Total umbrella retirement fund assets under administration (Rbn)(2)





Total number of active member records under administration

1 018 044

997 004

901 532


Number of active member records under administration – umbrella funds(1)

278 960

263 908

242 314


Number of healthcare corporate clients





Number of FPC retail clients

44 129

41 021

38 407


Corporate customer satisfaction index (out of 10)





Retail client satisfaction index (out of 10)




Retail assets under advisement (Rbn)





Insurance gross written premium (Rm)








Includes AFRF, Alexander Forbes CorePlan and AF Access


Includes AFRF, Alexander Forbes CorePlan, AF Access, Alexander Forbes Preservation Funds and Alexander Forbes Unclaimed Benefit Preservation Fund




  • Strong performances by retail, consultants and actuaries, insurance consulting and AF Life (group risk) business units
  • Low growth in the SA economy impacted on existing institutional client base with some employee reductions
  • Retail consultants exceeded a challenging new business target of R8 billion assets by R200 million
  • Performance on new business targets for institutional consulting and servicing teams fell short of expectations
  • Pleasing annualised new business wins by the dedicated institutional new business team
  • Timing of new business wins by the institutional new business team meant these had a lower-than-expected contribution in the year. Annualisation effect will, however, impact positively in the next year
  • Client retention remained at high levels, with the administration services business recording 99% (2013/14: 97%) and the consulting businesses 98% (2013/14: 98%)
  • Insurance policy sales to retail clients for death and disability cover by AF Life retail below expectations
  • Good traction on a range of strategies within the retail business, research and development, and LISP (AFICA)
  • Performance on some key operations and administration metrics fell below targets
  • Employee engagement rate increased from 59.0% to 62.3%
  • Client gains within the public sector below expectations, notwithstanding 12% growth on institutional revenues from this sector
  • Tax-free savings account investment launched in March 2015
  • Retention and sourcing of key talent in a competitive environment



Alexander Forbes Financial Services (AFFS) returned a satisfactory performance in 2014/15, growing net operating income (NOI) by 9% to R1 852 million (2013/14: R1 700 million). Profit from operations rose by 2% to R386 million. By year-end the key metric of active member records under administration exceeded the one million mark for the first time, standing at over 1 018 000, of whom three quarters were members of standalone funds.

Growth in profit from operations was muted by a conscious decision to invest in growth strategies, specifically in the retail part of our business where we strengthened our distribution capability and continued to make technology investments (some R8 million to date) in AFICA’s linked investment service provider (LISP). We also experienced the second-round impact of a significant repricing exercise on AFICA to increase value to our clients. The impact of these investments amounted to more than R50 million over a two-year period, muting profit from operations in the current year by 4%. In addition, growth was impacted on by concerted and targeted investment aimed at strengthening human capital in key areas of our business, including AF Life and insurance consulting.

Retail growth investments have, however, yielded an additional R850 million of asset flows. As the profit performances of other divisions attest, AFFS’s increased focus on the retail side of its core offering continues to translate into extremely pleasing financial results for the group as a whole.

Growth in expenses was 11% year on year, driven largely by employee and IT costs and, to a lesser extent, by a significant 41% rise in regulatory and compliance costs. Also contributing to the above-inflation increase in expenses was the introduction of the long-term incentive plan within the group which reduced the year-on-year increase in profit from operations by 3%.


Growth in institutional new business flows was 27% lower in value terms than the previous year although the number of appointments increased by 21% with 268 new clients being secured – a very commendable achievement given the contracting employment landscape in South Africa. The decrease in the value of new institutional business should be viewed in the context of the exceptional number of significant public sector appointments recorded in the previous year as well as the acquisition (also in 2013/14) of several new clients due to a key strategy change by a single large competitor.

This year our business continued to underpin the sustainability of core group earnings while investing in future growth. NOI from the administration of funds stood at R516 million, 8% up on the previous year, driven largely by inflation-related payroll increases, fee negotiations and new income.

The consultants and actuaries business met demanding targets, recording a 23% increase in operating profit from operations on the back of fee negotiations and new fee billing opportunities. Overall, our broader institutional consulting revenue increased by 6% year on year, a result that was negatively impacted by a significant health management solutions contract not realising anticipated benefits and below-inflation growth in our asset and beneficiary trust consulting units. The core health consulting unit returned a solid result but client retention remains a major focus in a very competitive environment. Excellent revenue growth was achieved by our insurance consulting unit and the umbrella funds consulting unit also returned good revenue growth, although operating profits for this unit were impacted on by increased expenses.

Particularly pleasing, our institutional client retention rates remain at high levels with the administration services business recording 99% (2013/14: 97%) and the consulting businesses a combined 98% (unchanged from 2013/14). We continue to focus on client service within all units and specifically measure key metrics within the administration unit, including our adoption of the principle that the ‘sun does not set on a client query’. We also continue to focus on improving administrative reliability in order to reduce any incidents giving rise to errors and omissions claims.

Assets in our institutional umbrella funds grew from R57.2 billion at year-end 2013/14 to R66.8 billion a year later. While an increase in the order of R9 billion and 17% in one year is commendable, this performance represented a slowdown relative to recent years and is receiving attention.


AFFS’s public sector net operating income rose by 12.6% to more than R207 million (2013/14: R184 million restated from the previously reported R167 million). At 12.6%, revenue growth was lower than the previous year’s 23%, but awards were mostly smaller than a year before. Positively, tender participation increased to 90% from 74% a year before.

AF Compensation Technologies (AFCT) experienced extremely challenging trading conditions with claims-processing efficiencies in particular not meeting expectations, while a significant contract failed to realise anticipated benefits. With the increased emphasis on a focused business model, the group decided that AFCT was no longer a natural fit with the longer-term strategy and that AFCT should be disposed of.


Our continued focus on the retail opportunity showed pleasing results, with retail assets under advisement growing by 17% to R56.9 billion in the year. Of this growth, R3.4 billion was due to market appreciation; new business assets written grew by 14%, or more than R8 billion. Importantly, financial planning consultants showed an increase in asset capture among members exiting AFFS-administered funds. The retail client base, to whom we provide advice and administration services, grew by 8%.

The performance of AF Life, our group and individual risk insurance operation, disappointed on retail risk, although the group risk business performed well. Despite a pleasing result from group risk, gross written premiums were impacted on by a decision not to match a competitor quote on a significant client as we did not believe it made good business sense to do so. The client in question contributed to underwriting profits during the year but, at the competitor rates, we did not believe those profits would continue into the future. Retail weaknesses included a delay in redesigning products and distribution strategies, and execution on such products and strategies. These shortcomings were subsequently addressed and management anticipates a stronger overall contribution from AF Life in the new year.

Over the past two years all levels and functions within AFFS have greatly enhanced their understanding of the group’s higher purpose – helping our individual members to attain financial peace of mind through our products and services. While we continued our work this year to ensure that all of our products, services and people treated our individual and corporate members fairly at all times, we also strove to ensure that we communicated more clearly, in simpler terms and more easily with customers.


Our membership education unit previously undertook individual member education that was aligned with execution against service level agreements. Our educators undertook 1 322 presentations at 282 of our institutional clients, presenting to 24 816 individual clients. The team drove 45 530 km to achieve this.

Also this year, ambitious service experience targets were set. These aimed to ensure that we improve our client response rate (in terms of the percentage of calls responded to each day; time taken to respond to each call; first call resolution percentage and client experience rating). A holistic service charter was developed and now forms the foundation of our client service commitment.

The most notable products released during the year were: the new AFRF investment menu, including a passive default investment option; two new AF Access products for smaller employers; and the AF tax free savings account investment product (a goals-based retail investment product). The AF global retail investment product was enhanced and relaunched.

Although the AF Access new products are yet to gain traction, all other new products were well supported. In particular, since its launch the AF global retail portfolio has attracted in excess of 80% of offshore new business written by FPC. Since the revised menu was put in place, 75% of AFRF assets under management have been invested in our house view portfolios (an increase from 73% previously). The AF tax-free savings account supports our drive to upgrade investment processes and online platforms in support of the wider retail objectives.

This year, we also launched our LifeGauge consulting model. LifeGauge is a newly developed digital platform that invites two-way interaction between trustees, employers and our consultants. LifeGauge visually represents various possible retirement futures for our fund members and allows clients and consultants to construct ‘what if’ scenarios to better understand how the various financial levers that influence future outcomes can shape their employees’ futures.

Our Boitumelo (‘Joy’) customer survey, consisting of over 200 face-to-face interviews with corporate clients, this year returned an 8.2 rating out of a possible 10 (2013/14: 8.4). Our retail member survey rating remained unchanged from the prior year at 9.2 (also out of a possible 10). These important measures were supplemented by an emailed survey to retirement funds and insurance consulting clients which revealed high levels of client satisfaction with the quality of our advice and technical expertise, the efficiency and accuracy of our administration, and our thought leadership.

We similarly maintained a high level of engagement with employees, our employee engagement rate reaching 62.3%, from 59.7% in 2013/14.

AFFS’s modest increase in profit from operations, achieved on the back of a net operating income increase that was driven largely by increasing market share rather than any increase in the size of the overall market, illustrates both our key risks and our key opportunities. These relate to the ability of the South African economy to sustain employment-enhancing growth. When businesses are creating jobs to sustain their own growth, our market leadership and reputational strength invariably translate into significantly larger increases in revenue and profitability than was the case in the year reviewed.


All units within AFFS have been set challenging targets for 2015/16. These include targets relating to institutional and umbrella fund membership as well as retail assets under advisement. Underperforming units have been allocated appropriate resources to achieve suitably restated growth targets and will be expected to record much improved performance in 2015/16.

South Africa’s macro-economic performance will inevitably have a marked bearing on our ability to grow our employee benefits and retail asset management businesses. Industrial action and a worsening in investor sentiment remain key risks.

At a strategic level, AFFS will cooperate closely with leaders of Investment Solutions and AfriNet within the Institutional cluster, as well as liaising with those heading up the new Retail cluster, in both instances developing new products and synergies which are expected to be value accretive and enhance our members’ financial well-being.