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| Chairman’s statement |
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| Paul Heinamann |
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Overall, the group achieved revenue
growth of 11% for the year ended 31 March 2006, with
income from operations exceeding R5 billion for the
first time in the history of our group. Trading results
from operations increased by 2%, despite difficult trading
conditions in our International Risk Services business.
We are reviewing a number of growth and development
opportunities for this business. Excluding International
Risk Services, trading results increased 15% in comparison
to the previous year, reflecting the strong trading
performance over the remainder of the group’s
operations. |
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Paul Heinamann |
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| Environment in
which we operate |
As regards the environment
in which we operate, the frameworks governing
retirement funds in our two main areas of operation
– being South Africa and the United Kingdom
– are under review. Our UK actuarial consulting
subsidiary, Lane Clark & Peacock, which has
won the Actuarial Consultancy of the Year in the
UK Pensions Awards for the second successive year,
now also operates elsewhere in Europe where the
occupational pension market is also under review.
Developments over the past five years in the short-term
insurance market have led to an increasing acceptance
of the need for enterprise-wide and operational
risk management. The year under review saw our
acquisition of Gibraltar-based Euroguard Insurance
Company and marked the tenth anniversary of our
pioneering the world’s first cell-captive
insurer, Guardrisk Insurance Company. Each of
our major businesses in South Africa is the leading
business of its kind in the country. Our growth
over the years has been solely due to our ability
to meet the needs of clients. During the year
under review, the compliance demands of what are
known as the FAIS and the FSA requirements in
South Africa and the UK respectively, required
management and staff to develop their skills and
their understanding of clients’ needs. Risk
Services in South Africa has again been accredited
with the ISO 9001:2000 for its service standards
and procedures, whilst the Financial Services
business is in the process of renewing its internationally-accredited
SAS70 award. Our youngest business in South Africa,
Investment Solutions, has grown rapidly because
it provides clients with huge flexibility, creativity
and efficiency not easily matched, if at all.
In the UK, we are rolling out similar services
for which there is a meaningful demand. |
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| Transformation |
| With South Africa in its tenth
year under full democracy, it is important for
the country’s economy to be globally competitive
and for organisations to build up the capacity
and skills necessary to deliver to the continent’s
needs and to compete internationally in their
chosen markets. The transformation of our South
African business and our understanding of the
changing environment have benefited considerably
from the guidance given by Cyril Ramaphosa, who
played a key role in the development of South
Africa’s 1996 Constitution just as he contributes
through his Vice-Chairmanship of the Global Business
Coalition on HIV/Aids. Our Direct Aids Intervention
programme has again been recognised by the Investing
in Life awards. Although a number of organisations,
including all of our South African businesses,
have adopted this programme, much more needs to
be done to improve the health, lifestyles and
productivity of affected persons and to arrest
the impact on the economy. In the employee benefits
industry, the effect on affordability of life
assurance is paralleled with less contribution
being available to build up for retirement. |
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| Welcome and thanks |
| We are extremely pleased to
welcome Peter Moyo who has been heading up our
African business and has been appointed group
chief executive with effect from 1 July 2006.
Rael Gordon will remain with the group until March
2007 during which period he will support Peter
Moyo and will focus primarily on our international
interests. Rael Gordon has made a significant
contribution through the development of Investment
Solutions and strengthening the group’s
core businesses and leadership team. The board
has expressed its huge appreciation to him. We
also welcome Alan van Biljon and Wendy Lucas-Bull
to the board which, after July 2006, will comprise
six independent directors, two non-executives
and three executives. We thank Geoff Todd for
his pragmatic counsel and wish him well in his
retirement after 10 years of loyal service on
the board and over 30 years as a member of management
before that. The board has reviewed its charter
and those of the various committees, as posted
on our website, and I am confident that the composition
and calibre of the board will stand us in good
stead. |
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| Assessing the future |
Shareholders will be aware
from our JSE announcement on 7 June 2006 that
unsolicited offers have been received from private
equity firms expressing an interest in acquiring
100% of the share capital of the company. A process
has been embarked upon whereby the board will
determine whether such offers are worthy of recommendation
to shareholders. Shareholders will ultimately
decide whether to accept any of these offers.
Our directly-owned operations in 27 countries
are supported by our partners in the EOS Risq
partnership in Europe, our Afrinet network and
other correspondents with whom we work on certain
accounts or territories, showing the value of
delivering services through experts who understand
their respective local markets. It is noteworthy
that this year also marks the fifteenth anniversary
of our first funding the University of South Africa’s
Chair in Risk Management, whose departmental student
count has grown from under 300 to 3 000. In so
doing, this initiative has raised understanding
and awareness of risk management among many of
today’s and future management at our clients,
in our industry and elsewhere. |
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| Goodbye to a mentor |
| Since 1947, Dr Anton Rupert
was a friend and supporter of our company, and
in more recent years, a Rupert family company
has become a shareholder in our group. Throughout
this period, Dr Rupert was regarded as an example
and mentor. His death early this year has robbed
us of a hugely respected figure in our lives and
we will miss him. Our thoughts and prayers are
with his family. |
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| Appreciation |
| We wish to record our appreciation
of the loyalty of our clients to whom our focus
remains a 100% commitment to governance, understanding
of needs and development of resources and service
standards. |
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| Transparency |
| Our painful experience with
regard to the historical non-disclosure of fees
earned as a result of the client-beneficial practice
of bulking bank accounts, and other practices
which the company is currently investigating,
has been a huge challenge to the management team
and I wish to thank and congratulate them and
the board for addressing the problem openly and
with determination. The company now has an opportunity
to re-position itself at the forefront of transparency
and openness in all markets in which we operate.
We aim to make Alexander Forbes the benchmark
by which industry standards are judged. |
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| Paul Heinamann |
| Non-Executive Chairman |
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