RMI in exclusive deal with subsidiary

OUTsurance may benefit

FINANCIAL services group Rand Merchant Investments (RMI) said yesterday that it had entered into exclusive discussions with its subsidiary, OUTsurance, regarding the potential disposal of its 49 percent interest in Main Street 1353 to to the insurance company.

Main Street 1353, is whollyowned by RMI and holds a 29.9 percent interest in Hastings – an insurance company it acquired this month.

RMI’s chief executive, Herman Bosman, said the proposed transaction would create enhanced alignment between Hastings and OUTsurance.

“OUTsurance and Hastings employ similar business models, albeit in different markets, specifically in relation to dynamic and analytical approaches to risk underwriting and the use of modern direct distribution channels,” Bosman said.

RMI said the transaction remained subject to the necessary terms including the obtainment of pricing and the regulatory approvals.

Car insurance Last year, RMI said it had acquired a 30 percent stake in the UK-based insurer Hastings for $634.6 million (R8.35 billion). Hastings sells car insurance through price comparisons websites.

RMI reported a 12 percent increase in normalised earnings to R1.8bn in the six months to December. The company said headline earnings increased by 8 percent to R1.6bn in the period. The group maintained an interim dividend of 53 cents for the period under review.

RMI, which is heavily invested in the financial services sector, has stakes in both listed and unlisted companies.

The company holds a 25 percent stake in Discovery and a 25 percent share in MMI Holdings.

It also also owns a 84 percent stake in OUTsurance, 100 percent in RMI Investment Managers and 25 percent in AlphaCode. The later is an RMI next-generation business platform.

Bosman said RMI and OUTsurance had identified areas of potential collaboration that might include the sharing of best practices and learnings between the businesses.

He said in addition to optimising its existing portfolio, the company would also increasingly invest in the next-generation financial services sector for growth.

“Numerous early-stage investment opportunities have been assessed across the financial technology (fintech) value chain, including lending, payments, advanced data analytics, block chain and investment solutions to identify businesses that have achieved some market traction and are poised for growth,” Bosman said. Financial services companies have over the past decade shown appetite in investing in fintech companies.

Professional services firm KPMG last month released its The Pulse of Fintech quarter 4 2016 report, which found that from 2015’s record-setting $46.7bn in global funding to fintech companies.

The report said 2016 brought reality back to the market with an almost 50 percent slide in fintech investment. It said annual fintech funding totalled $24.7bn last year.

KPMG global co-leader of fintech, Warren Mead, said after the big rush of investment in fintech in 2015, there was a lull in investment in the sector last year. “Amid growing geopolitical and macroeconomic uncertainty, 2016 saw the investor sentiment tide turn, with investors seemingly to want more proof that innovative solutions can be scaled and commercialised,” Mead said.

Bosman said RMI had a strong pipeline of investment opportunities and will continue to invest in the fintech space.

RMI shares increased 1.2 percent on the JSE yesterday to close at R43.01.