Lion of Africa

Finweek English Edition - - COMPANIES & INVESTMENTS - Tan­di­s­izwe Mahlut­shana

When Mus­taq Brey, chief e xec­u­tive of f i cer of Brim­stone, started Lion of Africa In­sur­ance (Lion) in 1999, the vi­sion was im­mense: to start a black-owned and -man­aged in­sur­ance com­pany to serve a niche seg­ment within the short-term in­sur­ance mar­ket. Brey says that while the ven­ture has made great strides, the in­surer is still not yet where it ul­ti­mately wants to be.

Lion started with an ini­tial cap­i­tal of R25m – R7.5m (30%) of which was Brim­stone’s con­tri­bu­tion, R12.5m (50%) by Guardian Na­tional In­sur­ance and the bal­ance by Comm­life Hold­ings, which came into the deal late af­ter African Har­vest failed to raise the cap­i­tal. Lion has grown its port­fo­lio value to R900m since in­cep­tion. In the same year, Guardian merged with San­tam, which would be­came Lion’s part­ner for most of the past decade. Fur­ther, over the last seven years, Brim­stone has bought back all the stakes from its orig­i­nal part­ners.

It has not been smooth sail­ing for the com­pany, how­ever. “It ’s been re­ally tough, es­pe­cially last year, but we’ve had some good years too in be­tween,” says Brey.

The niche short-term in­sur­ance player has been run­ning a loss-mak­ing com­mer­cial busi­ness unit for the past f ive years, and al­though it only brought in 20% of gross writ­ten pre­mi­ums, it still prompted a need for a busi­ness re­align­ment process.

Speaking to Fin­week, Lion chief ex­ec­u­tive off icer Adam Samie said: “Mar­ket com­pe­ti­tion for the com­mer­cial busi­ness seg­ment is ex­tremely tough and the un­der­writ­ing mar­gins are small as a con­se­quence.

“We have there­fore kept the port­fo­lio small and are look­ing for steady growth based on more care­ful client se­lec­tion rather than com­pete openly in the mar­ket where price is of­ten the only de­ter­mi­nant.”

He added that his team re­mains

Lion, a ma­jor sup­porter of us­ing pro­fes­sional brokers as a pri­mary dis­tri­bu­tion chan­nel, also had to rev iew it s en­gage­ments with the in­ter­me­di­ary mar­ket. A source close to t he pro­ceed­ings told Fin­week that Lion would only en­gage with a bro­ker­age if it could con­trib­ute busi­ness of at least R5m a month.

Samie ex­plained: “We have dis­en­gaged from those in­ter­me­di­aries that do not fit our busi­ness model right now and where we could not pro­vide a full-ser­vice of­fer­ing in the im­me­di­ate term, there­fore only pri­mar­ily fo­cus­ing on those pro­fes­sional in­ter­me­di­ary busi­nesses op­er­at­ing out of Gaut­eng, while we con­tinue to pro­vide sup­port in the ma­jor met­ro­pol­i­tan ar­eas of SA. Out­side of those brokers to whom we of­fer a f ull ser vice of­fer­ing, we en­deav­our to pro­vide sup­port ser­vice via B2B [busi­ness to busi­ness] ser­vices and our cen­tral cus­tomer ser­vice cen­tre.”

Go­ing for­ward, Lion will fo­cus on find­ing prof­itable growth op­por­tu­ni­ties in its ma­rine, li­a­bil­ity and ca­su­alty seg­ments, which con­trib­ute about 20% in turnover. The main con­trib­u­tors to the bot­tom line re­main the same – prop­erty and engi­neer­ing – ac­count­ing for 80% of to­tal rev­enue.

Brim­stone In­vest­ment Cor­po­ra­tion Limited op­ti­mistic about the seg­ment, and is in good shape to man­age the busi­ness into full prof it, de­spite the gen­er­ally poor re­turn from this seg­ment so far.

As many busi­nesses do when re-eval­u­at­ing their ob­jec­tives and out­comes, there were some cut-backs at the com­pany.

Af­ter an ini­tial 209 staff were ear­marked to face the guil­lo­tine, only 23 ac­tu­ally got the chop, mainly through vol­un­tary re­trench­ments and early re­tire­ment ar­range­ments.

“We tried wher­ever pos­si­ble to re­de­ploy staff through re­train­ing or re­lo­ca­tion within the busi­ness,” said Samie, adding that “com­pul­sory re­trench­ment were a last re­sort and only seven staff lost their jobs in this way”.

30%

9% 35% 26% 7 500 000 15 000 000 3 949 797 4 499 910 5 850 000 64 721 022 55 168 551 16 090 133

Mus­taq Brey Adam Samie

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