The demise of Sage Life US highlights the risks for life assurers of adopting an aggressive international expansion strategy.
Because of exchange controls, Sage was unable to raise capital for its US business through SA debt or equity, and was forced to raise debt finance on the international market.
Cash drains out of life offices for the first few years because of the need to pay commission upfront. So, as Sage US grew, it needed to bring an equity partner on board to bring in further capital. But in the equity bear market there was no appetite for a company like Sage US.
The most international SA-based life office is not Old Mutual, but African Life. In the September interims, Aflife reported its earnings were split 50-50 between SA and the rest of Africa. Exchange control is more relaxed for investments into the rest of Africa but Aflife has moved gradually into different countries instead of making one "big bang" investment.
It has set up greenfield businesses in Namibia, Zambia and Ghana and bought underperforming offices in Botswana and Kenya. Aflife CEO Jeremy Rowse says he prefers doing the latter. Botswana has already turned profitable.
Metropolitan, too, has adopted a regional strategy. Its Botswana and Namibia businesses made losses in 2001 but, thanks to the group's overall emphasis on costs, the international operations made a R13m contribution to core earnings, still barely 2% of the total.
Metropolitan has had a Namibian business for more than 25 years but its Botswana office was started only six years ago.
Old Mutual has a dominant market share in Zimbabwe and sizeable businesses in Namibia, Malawi and Kenya, but Africa outside SA accounts for less than 1% of group operating profit. There is blue sky in Mutual's 26% holding in the Indian life office OM Kotak Mahindra, otherwise expansion is focused on the US and the UK.
In the UK, the focus has been on private client asset management, in which its Gerrard business is the market leader, and Old Mutual Asset Management (UK), which has a UK domestic unit trust but still derives most of its income from the assets it manages for Old Mutual's SA clients.
Old Mutual sold its UK life office before demutualisation but recently established Selestia, which will sell market-linked investment products only, adapting the Investment Frontiers range to the UK market. In November, it won an award as the best online investment provider.
In the US , the largest investment has been into the former United Asset Management business, but the jewel in the international portfolio has been Fidelity & Guaranty Life, which focuses on the fixed-annuity market in which polices are backed by fixed interest and not equities. It had unprecedented sales of US$4bn, which required a capital injection of $313m.
Demand for F&G's fixed-annuity products will taper off when confidence in equity investment has been restored, but Old Mutual US Life head Guy Barker says this could take three to four years.
Meanwhile, F&G is offering Prosperity Series, its name for equity index options. These provide capital guarantees and exposure to the equity market upside.
Mutual's rivals have had more muted international expansion strategies.
Liberty was the most international of the life offices in the early 1990s when it jointly controlled Sun Life of the UK with UAP (now Axa). But this was sold to Axa when the authorities began levying heavy fines on life offices for pensions mis-selling.
Apart from unlisted Momentum, Liberty is now the least international of the big offices. Liberty chief operating officer Mike Jackson says Liberty aims for three international pillars through asset management, distribution and a life office.
It has a good international asset management business in Liberty Ermitage, a fund of funds business. Last year it acquired Hightree Financial Services, a boutique financial adviser that will be "encouraged" to support the Liberty Ermitage product range.
Jackson says the risks involved in UK life offices remain high and prices do not yet reflect this.
Sanlam derives about 4% of its pre tax operating profit from Sanlam International, which is involved in four major lines of business, all interrelated.
It has a fund of funds business, io Investors, which manages Sanlam's own $2,5bn in international assets.
But it is looking for UK-based business sourced primarily from Punter Southall, the group's UK actuarial and investment consulting business.
This is similar to Alexander Forbes's UK strategy, which is to grow its Investment Solutions UK business using the client base of its actuarial consultancy, Lane Clark & Peacock.