African broker Alexander Forbes might be abandoning global goals with risk unit sale.In a deal that will create an organization with more than $600 million in revenue, U.S. broker Lockton Inc. has agreed to pay 6 million [pounds sterling] (about $163 million) for the international insurance and risk service operation of South African-incorporated broker Alexander Forbes Alexander Forbes can refer to:
"We're here to announce the formation of the world's only independent, privately owned global broker," David M. Lockton, chairman of Lockton's board, told a press conference at Alexander Forbes' London offices. The sale of Alexander Forbes International Risk Services represents the apparent end of the group's ambition to diversify out of its home country. The price is low from the seller's point of view, said Neill Young, an insurance analyst at Coronation Fund Managers in Cape Town Cape Town or Capetown, city (1991 pop. 854,616), legislative capital of South Africa and capital of Western Cape, a port on the Atlantic Ocean. It was the capital of Cape Province before that province's subdivision in 1994. , South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. . "We think it is probably worth about 115 million [pounds sterling] about $218 million]," Young said. The sale price does not reflect the cost of creating, and restructuring, AFIRS, Young said. Putting the AFIRS operation together cost at least 150 million [pounds sterling] (about $284 million), Young said, with last year's restructuring costing another 10 million [pounds sterling] (about $18.9 million). These efforts suggest a boost in revenue should have been on the way, Young said, noting "It looks like the hard work's been done. I'm not sure the price really reflects the potential of the business" In contrast to "virtually no profit" in its latest financial results, Young argued, AFIRS should be making an operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of between 15 million [pounds sterling] (about $28.4 million) and 20 million [pounds sterling] (about $37.9 million) a year. One theory in South African financial circles is that the price was pushed down by Alexander Forbes' cautionary announcement, last updated in July, that it had begun talks "with private equity parties regarding a potential transaction to acquire 100% of the company." This thinking suggests that a potential buyer of the parent company would not be interested in AFIRS. The price for AFIRS could have been reduced by problems in the international broking Bro´king a. 1. Of or pertaining to a broker or brokers, or to brokerage. Redeem from broking pawn the blemished crown. - Shak. sector, Young said. He pointed to the investigations by New York state Attorney General The New York State Attorney General is the chief legal officer of the State of New York. The office has been in existence in some form since 1626, under the Dutch colonial government of New York. Eliot Spitzer and the attention paid to contingent commissions in the United States. "That's had some structural impact on the industry as a whole globally," Young said. And there are company-specific issues, Young said, suggesting that AFIRS lacks the scale to achieve the same level of profitability as some of its competitors. There is also a cyclical element, Young said, noting that pricing has been under pressure in some lines, such as the professional risk, in which AFIRS is active. Young noted the connections between AFIRS and Lockton. "From what I understand, Forbes worked quite closely with Lockton, servicing Lockton's U.S. clients into the Lloyd's market," he said. Alexander Forbes Ltd. Revenues 2005:$753 million, business year ending March 31, 2005 Top Executive: Rael Gordon, Chief Executive Officer Alexander Forbes Place, 61 Katherine St., Sandown, Marshalltown, 2146 South Africa Phone: 27-11-269-0000 Fax: 27-11-269-1111 www.alexanderforbes Trading Symbol Trading symbol See: Ticker symbol : AFB AFB abbr. acid-fast bacillus AFB Acid-fast bacillus, also 1. Aflatoxin B 2. Aorto-femoral bypass on the Johannesburg Stock Exchange Johannesburg Stock Exchange (JSE) Established in 1886, the Johannesburg Stock Exchange is the only stock exchange in South Africa. Gold and mining stocks form the majority of shares listed. Ownership: Public Top Lines: Risk services; financial services; multimanager investments Developments in 2005: Strong operating results from African businesses; significant growth in international financial services; 1.5 billion rand (about $397.5 million) of debt repaid; maintenance of shareholder distribution; strengthening corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and integrating risk-management procedures into operations and control structures worldwide; and continuation of Black Economic Empowerment Black Economic Empowerment (BEE) is a program launched by the South African government to redress the inequalities of Apartheid by giving previously disadvantaged groups (black Africans, Coloureds and Indians) economic opportunities previously not available to them. as a social and business imperative in South Africa. Strategy in 2006 and 2007: Drive growth in each of main business entities: Africa Financial Services, International Financial Services, Investment Solutions, Africa Risk and Insurance Services, International Risk Services. Lockton Companies Inc. Revenues 2005:$396 million Brokerage Revenues 2005:$388 million Top Executive: David M. Lockton, Chairman 444 W. 47th St., Suite 900, Kansas City, Missouri Kansas City is the largest city in the state of Missouri. It encompasses parts of Jackson, Clay, Cass, and Platte counties and is the anchor city of the Kansas City Metropolitan Area, the second largest in Missouri, which includes counties in both Missouri and Kansas. 64112-1906 Phone: 816-960-9000 Fax; 816-960-9099 www.lockton.com Ownership: Private Top Lines: Property/casualty; risk management services; benefits Developments in 2005: New offices in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. and South Florida; Lockton Companies of Colorado Inc., a unit of Lockton, acquired substantially all of the assets of Benefit Management & Design Inc., a Denver-based insurance broker and employee-benefit consulting firm; Lockton Risk Services, a unit of Lockton, said in April 2005 that it would become Lockton Affinity. Source: Alexander Forbes Ltd. was No. 9 and Lockton Companies Inc. No. 14 in Best's Review's Top Global Insurance Brokers ranking published in July 2006 Best's Review. |
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