Life offices' shares don't have much of a chance in poor equity markets. The companies' net asset value is mostly accounted for by equity investments.
Add slow sales to the mix and you have a poor investment. The Life Offices Association says total income for the industry increased by just 3% - well below inflation - in the six months to December 2002 to R86,3bn. There was no growth for the half-year in total new premiums , which remained at R23,2bn.
Investment income, which is usually more profitable than risk benefit business, dropped 1% to R19,2bn and total assets of the industry fell by 7% in 2002 to R702,9bn.
Unlike its local rivals, Old Mutual has at least had a stable top team, with Jim Sutcliffe as group CEO and Roddy Sparks as head of Old Mutual SA.
Old Mutual is finally starting to benefit from its relationship with Nedcor . And it rebranded Permanent Bank as Old Mutual Bank, which will now act as a shop window for Mutual's middle-market products. Bancassurance sales increased by 14% .
Sanlam's indecision about its relationship with Absa was one of the lowlights of the past year. Sanlam now trades on par with its November 1998 listing price of 600c, 38% below its 12-month high.
It is surprising that it has performed relatively better than Old Mutual, considering that operationally Sanlam is in a mess. It has been losing market share, and for four months it was in a leadership vacuum as the board looked for a successor to Leon Vermaak.
There was some disappointment when Johan van Zyl, head of short-term insurer Santam, was appointed to Vermaak's old job.
But Van Zyl has quickly focused on basic operational issues. "The next three years will not be pleasant," he says, "but Sanlam has the right people and products for recovery."
Van Zyl will restore the identity of Sanlam Employee Benefits, which Vermaak buried in Sanlam Life. There will also be some realignment of operations: unit trusts and the international asset management businesses are likely to be part of Sanlam Investment Management (SIM).
To give credit to Vermaak, he at least started to tackle one of Sanlam's critical problems, its poor investment performance, with the appointment of senior investment professionals such as Johan van der Merwe, George Howard and Steve Mills to revitalise the business.
Liberty has been the best-performing life office because of its operational strength (see page 72). The share price slumped below R50 after CEO Roy Andersen's sudden resignation but this did not have anywhere the impact on confidence that Vermaak's departure had on Sanlam.
The 31% decline in Liberty's share price from its peak mirrors the decline in its embedded value; it is the only life office in SA that does not trade at significant discount to embedded value.
Momentum's growth, particularly in recurring-premium income, had been flat for two years. Much of the growth up to mid-2000 had come from asset swap products. But over the six months to December, Momentum's new recurring-premium business was up 22%.
It has expanded from its heartland in Pretoria into the Western Cape and KwaZulu Natal.
After years of selling its products exclusively through independent brokers, Momentum has decided to set up a tied agency force. CEO Hillie Meyer says agents have helped to grow its sales during the lean years from 2000 to 2002.
There was a small core of agents from the old Lifegro force, with 30 intermediaries selling the Momentum range exclusively, though they were treated as brokers. Meyer says that if Momentum chooses only the most experienced and productive intermediaries to join its agency force, it will not have to set up an expensive agency management infrastructure - agents will receive the same product training that brokers receive already.
But the experience of its competitors shows that managing an agency force is more than simply renaming a couple of broker consultants agency managers .
In any case, Momentum will remain focused on the traditional, commission-based, one-to-one sales model and will operate only in the FirstRand wealth cluster.
FirstRand's bancassurance business, FNB Life, will operate autonomously in the retail cluster to develop products for sale through the branches, credit life and funeral policies. FNB's funeral policy business has been outsourced to Capital Alliance, which is working more closely with FirstRand.
It is no secret that Capital Alliance and FirstRand worked together in putting together a bid to buy Sage . Capital Alliance MD Ian Kirk still sees more opportunity to unlock profits for shareholders through administrative efficiencies than through sales in its target mass market.
He says formal-sector employment continues to fall, particularly as the strong rand hits exports, which have more than offset the opportunity for new business made possible through tax cuts. Kirk says that as it is cheaper to distribute through bank branches or retailers than through commission-based agents or brokers, Capital Alliance can offer better value than other providers such as Metropolitan and African Life.