Investment holding company Rand Merchant Investment Holdings (RMI) has mapped out the managed transition that will see it rebrand to OUTsurance Group, a process that will see its biggest asset take over the listing of its parent.
While the official name change will only happen once the registration process is complete the OUTsurance takeover of RMI’s listing will give shareholders access to a short-term insurer with exposure to multiple geographies and which accounts for about 95.4% of its parent’s asset base. The simpler operational structure will also see the OUTsurance management team take over the listed entity while previous management and associated costs will be phased out, ultimately resulting in a higher future dividend pay-out ratio.
“It’s been a great journey, thank you,” said a visibly emotional Herman Bosman, RMI’s outgoing CEO, at the group’s annual results presentation on Thursday, which saw it report a 16.7% drop in normalised earnings to R2.95bn for the year to end-June. The group also upped its ordinary dividend by 45.6% to 65.5c and declared a special dividend of 142c.
As part of the transition to OUTsurance Group a new entity will be created called RMI TreasuryCo, which will house all of the group’s unregulated assets that are not already part of the short-term insurer. RMI TreasuryCo., which will be a wholly owned subsidiary of OUTsurance Group, will house fintech entity AlphaCode; RMI Investment Managers, which encompasses the asset management operations; as well as R700m in cash net of the dividends declared on Thursday.
Bosman said this cash pile will likely be distributed to OUTsurance shareholders in due course. There are also plans to eventually dispose of most of the unregulated assets housed under RMI TreasuryCo.
RMI Investment Managers, which includes stakes in soft commodities hedge fund Polarstar as well as Truffle Asset Management, Perpetua, Northstar, Sentio, Granate, Sesfikile, Ethos, and Visio, have collective assets under management of R205bn. While Polarstar will be retained by RMI TreasuryCo, the remaining asset stakes are likely to be sold to Momentum Metropolitan and Royal Bafokeng Investment Holding Co. (RBIH) subject to the outcome of current talks.
Bosman says RMI TreasuryCo. will aim to grow the remaining assets — essentially AlphaCode and Polarstar — over the next three to four years before it considers possible disposals.
“In the fullness of time we will see RMI TreasuryCo. become cash and that will be distributed to OUTsurance shareholders, probably over the next three to four years,” Bosman told Business Day.
The official outline of the new OUTsurance Group structure came after the holding company began the process of unbundling its 25% stake in Discovery and its 26.8% holding in Momentum Metropolitan in 2021. That process, which saw RMI hive off its 167-million shares in Discovery and 401-million in Momentum, was finalised in April.
The unbundling process, along with the special dividend declaration, and the R8.6bn profit it booked (net of debt) after offloading its 30% stake in UK insurer Hastings to Nordic insurance group Sampo, represented an approximately R36bn value distribution to shareholders, RMI said on Thursday.
The collapse of the RMI holding company structure and reduction of the associated personnel costs will continue until March 2023 after which the only remaining costs will be those of the listed entity, OUTsurance Group. That process will also propel the OUTsurance management team to the front and centre of the listed entity, making them directly accountable to shareholders.
“We are excited to move forward as a listed company and are confident that we will continue to grow our business, disrupt the market through innovation and further enhance our track record of providing value to our shareholders and broader stakeholders,” said Marthinus Visser, CEO of OUTsurance.
OUTsurance reported 14.4% growth in gross written premiums to R23.5bn in the past financial year though operating profit was down 13.4% at R2.9bn. Visser described the results as “satisfactory” given the headwinds faced by the company during the period, which was characterised by severe flooding in SA and Australia, ongoing claims inflation and increased power surge claims due to loadshedding.
“Our results underline the resilience of the OUTsurance business given the challenging operating environment of the last year,” he said.
A final announcement on the OUTsurance listing and a date for the termination of trading under the RMI moniker is scheduled to be announced on November 28.
Note: September 23 2022
This story has been updated to remove Momentum Metropolitan as an affiliate holding of RMI investment mangers while adding Sentio, Granate, Sesfikile.
With Nico Gous
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