Alexander Forbes CEO Dawie de Villiers says the sale of the group’s short-term insurance business to Momentum Metropolitan Holdings (MMH) will destroy the perception that he was placed at the country’s largest pension fund administrator to do Sanlam’s bidding.
“We were pretty happy with the price. But the more pleasing for me about the sale is the actual process that we followed. I was under scrutiny personally from the start when I joined here that I’m placed here by Sanlam to do deals with Sanlam and I was this jockey boy,” he said.
De Villiers had spent 25 years at Sanlam, heading the insurer’s employee benefits division for five years, before being appointed CEO of Alexander Forbes in November 2018 following the dismissal of Andrew Darfoor in September. African Rainbow Capital, which is a shareholder in both Sanlam and Alexander Forbes, was outspoken about its unhappiness with Darfoor before his axing.
He said he was happy that “the best man won” — in this case it was Momentum Metropolitan Holdings, previously called the MMI Group. The pension funds administrator announced last week that Momentum won the highly contested bid for its short-term insurance business which Alexander Forbes first announced it would offload in March.
MMH will pay around R1.94bn for the unit, which was contributing about 20% of the group’s revenue. The deal is likely to be completed towards the end of 2019. Alexander Forbes sold the short-term insurance business to focus on its core business of pension fund administration, asset management and consulting.
De Villiers said Momentum paid a premium over and above asset value to acquire the short-term insurance business. He said there were initially over 20 local and international interested parties after Alexander Forbes announced that it was looking to sell in March. This later narrowed to 10 competitive bids and then to a final shortlist of four companies.
Sanlam’s short-term insurance subsidiary Santam was one of the bidders that lost to Momentum. “All the participants in the process actually commended us on the fairness of the process,” said De Villiers. “The best man won eventually and the best man can only win if you run a fair process.”
MMH’s chief financial officer Risto Ketola said this deal will give his company's short-term insurance business the competitive edge that comes with being a mid-sized player.
“Both us and Forbes are not that big. But combined, we will be more material. We are looking at R2bn to R3.5bn in annual income, which is not big but it will put us in the mid-size camp now,” he said.
MMH said it has identified short-term insurance as an area in which it wants to inject more capital. Ketola said the experience the group has had since it ventured into short-term insurance six years ago has convinced it that it is a growth area.
“That business has shown big traction in a weak economy. Our ability to play in this space has improved a lot,” said Ketola. He said the group will, however, concentrate its short-term insurance aspirations in SA and has no plans to venture further afield other than maintaining the few general insurance businesses it acquired years ago in Namibia, Kenya and Tanzania.
The sale of Alexander Forbes’s short-term insurance business is the second deal to be sealed between the two companies. MMH bought Guardrisk from Alexander Forbes five years ago. Guardrisk, which only services corporate clients, was responsible for most of the R4.8bn in non-life net insurance premiums that MMH collected in the six months to December 2018.
Momentum short-term insurance, the business that MMH built from scratch six years ago, was on the other hand collecting about R900m in net premiums a year and held less than 1% in the personal and commercial lines market share. The Alexander Forbes acquisition will increase this by 2%-2.5%, and MMH expects to grow this gradually once it has bedded down synergies between the two businesses.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.