Lion of Africa
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”.
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