Rand Merchant Investment Holdings (RMI), which has paid out R47.9 billion to shareholders from 2014 to September 2022 via capital appreciation and dividends, has come to the end of an era as an investor in financial services businesses.
The group announced yesterday that the final step would be the transitioning and re-branding from RMI to “OUTsurance Group Limited” – OUTsurance Group was hoped would begin trading on the JSE on December 7 this year.
The return to shareholders to September 30 amounted to 116.7%, assuming the reinvestment of dividends, while the JSE’s Financial 15 Index returned only 5.6% over the period.
RMI said yesterday in a statement that a decision in 2014 to re-activate its portfolio management and investment focus resulted in the recent unbundling of its shares in Discovery and Momentum Metropolitan Holding.
It also saw the sale of RMI’s 30% stake in UK insurance company Hastings Group to its co-shareholder in the business, Sampo, which resulted in a R8.6bn profit over the four years of the investment.
The unbundling, Hastings sale and a special dividend announced on March 16 represented a R36bn value distribution to shareholders, the group said.
The OUTsurance listing would give shareholders access to a growing, short-term insurance group operating across multiple geographies.
The listing would offer a single access point to OUTsurance, resulting in a more focused OUTsurance management team with direct accountability to shareholders, enable a higher dividend payout ratio, and result in the phased reduction of the holding company and personnel costs at RMI.
RMI will retain its shareholder register and will remain listed in the Diversified Financial Services sector of the JSE but will be renamed “OUTsurance Group Limited”.
After the listing, OUTsurance Group will hold two subsidiaries: OUTsurance, held 89.3% by OUTsurance Group and 10.7% by OUTsurance management trusts and management minority shareholders.
The second subsidiary will be RMI TreasuryCo, which would include the remaining assets of RMI prior to the OUTsurance Listing) as well as its interests in AlphaCode and RMI Investment Managers Group.
OUTsurance underwrites short-term insurance products in South Africa, Australia and Namibia. It offers car, home, business and pet insurance products to the South African market.
OUTsurance Life Insurance Company and OUTvest offer life, funeral and investment products to the South African market. Youi Holdings offers car, home, business and third-party insurance products to the Australian market.
In its most recent results, the OUTsurance Group reported gross written premium of R23.5bn and operating profit and normalised earnings of R2.9bn and R2.3bn, respectively.
A reduction in profitability was driven by larger natural weather losses in Australia and South Africa, coupled with investments in growth= initiatives. The Hastings sale enabled OUTsurance to retain R2.5bn of the sales proceeds to fund international expansion.
RMI’s unlisted assets have a net asset value of R1.9bn.
OUTsurance’s directors expect the global and local economic backdrop to remain volatile for the foreseeable future and their major strategic focus for the 2023 financial year was to drive the growth initiatives to profitability and target margins.
The international expansion initiative is gaining momentum, and a licensing application will be submitted in 2023.
SADIF Investment Analytics said last week in a research report RMI had strong financials and good corporate governance. In terms of risk, it has “low operational risk. It has low information risk and low market risk.”
“The current market sentiment in relation to the company is neutral with unfavourable technical indicators, negative estimates and an attractive valuation,” SADIF said.