Short-term insurer King Price has bought African Bank’s former life insurance business, Stangen, paving a way for it to enter the South African life insurance market.
Up until now, King Price, which entered South Africa’s insurance market in 2012, has only sold short-term insurance, offering motor, household, business and other specialist insurance products. Its short-term book now collects annual premiums of R2.3 billion, and the insurer says it sells more than 12 000 policies a month.
But it has demonstrated growth aspirations recently, starting with its R2 billion bid for Alexander Forbes’ short term insurance business when it was up for sale early in 2019. That bid was, however, won by Momentum Metropolitan Holdings.
Soon after the Alexander Forbes bid, in June 2019 King Price announced that it had also made a bid to acquire Stangen from African Phoenix Investments, the company that emerged when African Bank Investment Limited came out of business rescue.
On Tuesday, King Price said it finally got the green light from regulatory authorities to acquire Stangen on 28 February for R140 million. Stangen has more than 55 000 policyholders across its life cover, group schemes insurance and funeral cover businesses. The insurer offers life cover, disability, funeral plans, group benefits and more. By adding a life insurance portfolio, King Price now joins industry heavyweights like Old Mutual, Sanlam, Metropolitan and Hollard in competing for the share of consumers’ expenditure on life insurance.
"We’d always planned to enter the life insurance market, which is three times the size of the short-term insurance market in SA, and buying an existing, niche life insurance business makes sense on so many levels," said King Price CEO, Gideon Galloway.
He said by buying an existing life insurer instead of building its book from scratch, King Price would gain a running start into the highly competitive life insurance market. He said King Price would launch its life brand within the next 12 months, and forecast that life products will make up half of its revenue within 10 years of the acquisition.
Gideon said he was confident that King Price would be able to sustain a 40% year-on-year growth target following the acquisition.
"Our existing distribution channels are entrenched, and we’ll rely on them to increase the scale of the Stangen book. We see huge potential for significant growth in the market," he said.