FORBES GROUP LTD.

25 Sauer Street Extension,

Johannesburg, 2001 South Africa;

27/11/378-4225; fax: 27/11/378-4222

Internet: www.forbesgroup.co.za

1997/8 1996/7

Gross revenues $270.8 million $161.5 million

Brokerage revenues $249.1 million $161.5 million

Brokerage: Retail 52% 68%

Wholesale 14% 0%

Reinsurance 3% 2%

Personal 9% 14%

Services 14% 10%

Investment income 3% 2%

Other 5% 4%

Employees 4,100 3,325

Rev./Employee $64,067 $47,608

Offices 63 35

Converted at applicable exchange rates. Fiscal year ends March 31.

Forbes Group Ltd. has catapulted into the ranks of the world's 10 largest insurance brokers for the first time with last year's acquisition of London broker Nelson Hurst P.L.C.

The acquisition substantially increased Forbes' international presence, particularly in the Far East and Latin America, bringing its total to 63 offices from 35. Forbes also strengthened its presence in Africa through acquisitions and joint ventures.

The broker also has entered into a series of reciprocal agreements to service clients in territories not covered by the Forbes network of offices.

Johannesburg, South Africa-based Forbes saw total corporate gross revenues soar 75.6% to 1.28 billion rand for the fiscal year ended March 31, 1998.

Converted to U.S. dollars using average exchange rates, total gross revenues rose 67.7% to $270.8 million.

Forbes' brokerage revenues jumped 61.5% to 1.18 billion rand. Converted to dollars, brokerage revenues totaled $249.1 million, making Forbes Group the world's ninth-largest broker.

Before the Nelson Hurst acquisition last August, Forbes already owned almost 10% of the broker and was in a joint venture with its U.K. retail business, holding almost half the stock in Nelson Hurst UK Holdings Ltd.

"Nelson Hurst was a very important strategic acquisition, because before that, 95% of our revenue was from South Africa," said Graeme Kerrigan, Forbes' group chief executive. Now, that percentage has dropped to 75%.

As the largest broker in South Africa, Forbes previously had had a significant market share in a very well-developed insurance market. Now the broker can benefit from geographical diversification, said Mr. Kerrigan.

Latin America has been identified as a hot spot for development. These emerging markets have growing economies and are "not too dissimilar to South Africa," he said. Forbes understands the internal structure of these markets and is looking at "particular opportunities in niche-market business," such as health care, certain liability coverages and defined contribution pension plans.

Already having an established local presence is a distinct advantage over entering a market cold, according to Mr. Kerrigan. Although the Latin American offices represent relatively small businesses, they are efficiently run and constantly looking for new opportunities, he said.

Taking Nelson Hurst under the Forbes wing also added 13 offices in nine Southeast Asian countries.

Mr. Kerrigan is undisturbed about the recent economic slump in the area. His faith is sufficiently strong that Forbes is actively looking at acquiring new businesses in the region, particularly in Hong Kong and Singapore. Already, the broker is in a number of joint ventures, Mr. Kerrigan said. In particular, he sees opportunities in expanding Forbes' employee benefits consulting in the region.

Employee benefits consulting is one of the two main strings to Forbes' bow, with subsidiary Alexander Forbes, the fastest-growing division in the group. Last year, the benefits subsidiary's revenues soared 69%.

This meteoric growth is expected to continue, and Forbes has launched a number of new strategies, including a black empowerment benefits consulting company, NBC Consultants & Actuaries Ltd., started in March of this year (BI, April 13).

Empowerment strategies have been working inward as well as outward. In April, a consortium of three black investment companies, Worldwide African Investment Holdings, Malesela Holdings and Women Investment Portfolio Holdings, bought an 18.5% stake in Forbes for 571.5 million rand ($113 million), at Forbes' invitation. An immediate benefit of the deal was earmarking 291 million rand ($61.7 million) to fund new acquisitions and reduce the debt Forbes incurred in buying Nelson Hurst.

Risk management consulting and insurance brokering form Forbes' second major string under Nelson Hurst Ltd.

The risk management consulting and insurance brokering operations have been divided into:

* Price Forbes, providing insurance brokering and risk management services for large corporate and smaller commercial clients in Africa, as well as personal insurance brokering services. It also includes The Claims Management Co., a new third-party claims administrator.

* Wholesale group, comprising Nelson Hurst Aviation, Nelson Hurst Broker Services, Nelson Hurst International, Nelson Hurst Marine and Nelson Hurst North America, operating out of London.

* Physical and financial risk management, including reinsurance business in London, South Africa, Hong Kong and Mauritius under Nelson Hurst Reinsurance; Integrated Risk Consultants (Pty) Ltd., specializing in alternative risk financing; CRM International Group, providing integrated risk management strategies; and cell captive companies Euroguard Insurance Co. Ltd. and Guardrisk Insurance Co. Ltd.

* Asia and Latin America, comprising the Nelson Hurst operations in those territories and a joint venture with the Hopewell Group for South China business.

* U.K. and Europe, including Nelson Hurst Risk Services, combining the professional indemnity, financial institutions and U.K. retail operations.

* Robert Gordon Group, providing captive management and associated services and employee benefits consulting in Jersey.

Forbes also has a number of associated companies, including Thebe Hosken Group, South Africa's largest black-controlled insurance broker, in which Forbes holds 49.99% of the stock.

Seamus Casserly, managing director of Price Forbes, characterized the group's latest financial year as "highly competitive."

The competition has forced companies to innovate in order to grow, he said. Initiatives such as Euroguard, a Gibraltar-based captive operation set up in 1996 to provide professional indemnity coverage, have been designed to promote expansion. Euroguard should start showing profits within the next 18 months. "It has huge potential," he said.

Last year "was characterized by the continuation and increase in those investments, recognizing that the market is becoming more competitive as we move forward," Mr. Casserly said.

In the South African market, Price Forbes remains dominant in corporate business, he said. It remains small in the personal lines sector, which is increasingly competitive in the country, he added, though Price Forbes has launched some initiatives to increase its market share in that sector.

Forbes' office network also is under constant review.

The company now has an extensive network of offices across South Africa and has been increasing its network across the African continent with Afrinet. Forbes has a majority stake in all the companies involved in the network, which Mr. Casserly foresees as being "consolidated" in the future.

Recent additions to the network have included Malawi Insurance Brokers, based in Blantyre, Malawi, and Lumley Namibia in Namibia (BI, March 9; Oct. 13, 1997). It added Willis Corroon (Pvt) Zimbabwe last September as a managed joint venture, and a specialist credit broker, Johannesburg-based Owens & Davern Credit Insurance Brokers, at the beginning of this year.

Forbes set up new operations in Angola and Mozambique last year as a joint venture with Jardine Lloyd Thompson P.L.C. and also added a new claims management operation to its South African business.

In addition, Price Forbes (Mauritius) was established to deal with wholesale and reinsurance business.

"Trade in other (African territories) is through correspondent arrangements," said Mr. Casserly. For example, Forbes has informal arrangements with French broker Gras Savoye & Cie. in Francophone African countries, and Willis Corroon P.L.C. is Forbes' second preferred wholesaler, he said.

Forbes is also beefing up its international relationships. Late last year it entered a reciprocal service agreement with Lockton Cos. of Prairie Village, Kan., to provide services to both groups' clients in their various operating territories (BI, Oct. 6, 1997). And last month it increased its involvement with FDG S.A., a Luxembourg-based network of European brokers (BI, June 29).

"We need representation in Europe," said Mr. Casserly. FDG "is a non-aligned network that concentrates on the corporate market," which can provide Forbes with both servicing of its clients and new business opportunities -- in a reciprocal arrangement. By entering the arrangement, "we are not exposing our flanks to the broker groups that exist," he added.

FDG describes itself as "Europe's leading truly independent insurance broking and risk consultancy organizations." It operates in 16 countries through its four European partners, Funk Group GmbH of Germany, Diot S.A. of France, GrECo International AG of Austria and J. Van Breda & Co. g.c.v in Belgium. Forbes' involvement adds another 25 countries represented through the network.

Networks are one sort of initiative Forbes will continue to pursue, said Mr. Kerrigan. "The large brokers'. . .strategies are to buy in big business elsewhere," he said. "We don't have the funds, so our strategy is to partner rather than purchase." This course substantially reduces the risk of entering new territories where the language and business culture may represent "a huge barrier," he added.

Forbes also is reluctant to enter the U.S. market in any form other than its involvement with Lockton.

Earlier this year saw a change in the executive structure of Forbes, with the retirement of Paul Heinamann as group chief executive and Mr. Kerrigan taking over the role from his previous post as joint managing director of Alexander Forbes.

Leon Lewis assumes full responsibility as managing director of the employee benefits business, while Mr. Heinamann currently remains as deputy chairman. That post will become non-executive at the end of March 1999. John Percy-Davis was appointed the chairman of Nelson Hurst Ltd. after the acquisition.

In the 52-week period that ended March 31, 1998, Forbes shares reach a high of 15.25 rand ($3.23) and a low of 7.10 rand ($1.50) on the Johannesburg Stock exchange.