Clientèle targets grant recipients and state employees

Life insurance group Clientèle says its recently concluded multimillion-rand deal to buy Emerald Life gives it access to more than 350,000 policy holders, with a sizeable book linked to SA Social Security Agency (Sassa) grant recipients and public servants.

“Emerald Life is a licensed micro-insurer that specialises in underwriting funeral products for social grant recipients as well as government employees in SA. The business services about 360,000 active policyholders, with strong and consistent premium inflows,” Clientèle said on Monday.

Emerald, whose distribution model is based on a national network of about 2,500 internal sales representatives, has over the years built a strong presence in underserved communities through its access to Sassa-linked debit orders and loyal policyholder base.

It is these metrics that saw the JSE-listed Clientèle acquire Emerald in a R641m deal — funded through a combination of free cash and the issuance of preference shares by Clientèle Life.

“The principal reason for the acquisition of Emerald Life is to accelerate the group’s growth in the high-growth funeral insurance market, particularly within lower-income and Sassa-linked customer segments, through immediate access to a sizeable in-force book of circa 360,000 active policyholders,” the group said. “This is expected to increase Clientèle’s active policy base by about 25% and grow annual premium income by around 15%.”

Clientèle, worth about R6.3bn, has been pursuing acquisitive growth in search of scale in a highly competitive industry that has seen the likes of Capitec disrupt the market, amassing millions of clients within a short space of time.

The share price has surged 40% over the past five years and last year the company completed the R1.9bn acquisition of 1Life, creating a group with 1.5-million policies with an estimated embedded value of nearly R8bn.

1Life was owned by Telesure Investment Holdings (TIH), which owns Auto & General Insurance, Budget Insurance, Dialdirect Insurance and First for Women Insurance.

Clientèle settled the acquisition by issuing scrip to TIH. The group said 1Life successfully moved and transitioned operations to the Clientèle Campus during the first half of the financial year.

“As with any merger, it is expected to take some time to fully integrate the people, systems and processes to ensure optimal value is realised from this transaction. Nonetheless the move went well and initial signs are positive,” it said.

Clientèle reported value of new business of R330m in the year ended June, and headline earnings attributable to equity holders growth of 100% to R659m. This performance includes the first-time reported earnings of 1Life of R132.5m.

The life insurance group said SA’s high unemployment rate is badly affecting its target market, reporting a rise in withdrawals and debit order disputes.

“Currently, our market continues to experience difficult economic circumstances, negatively affecting affordability and financial resilience. As a result, the group continues to experience high levels of withdrawals, suspension of debit order mandates, and disputes,” it said.

“As a consequence, the group has strengthened the withdrawal assumptions underpinning the reported results.”

The group a few years ago dragged the Payments Association of SA (Pasa) to court seeking an order compelling banks not to unilaterally reverse lawful debit orders.

Pasa, the payment system management body recognised by the central bank, has more than 20 members, including SA’s biggest banks: Absa, Nedbank, Capitec, Standard Bank, FNB and Investec. The entity plays a key role in SA’s payments industry, managing its members’ activities in the national payment system.

Khumalok@businesslive.co.za