Daling’s dramatic deal

SIM TSHABALALA HAS BEEN APPOINTED SOLE CEO, ENDING THE DUAL ROLE SHARED WITH BEN KRUGER

The present MMI might never have been formed without two key events in the early 1990s. The most dramatic was the decision in 1993 by Sanlam chairman Marinus Daling to sell control of Metropolitan to a black consortium, New Africa Investments (Nail), headed by respected doctor and activist Nthato Motlana.

Cyril Ramaphosa later became a Nail executive. It was the first empowerment deal, back in 1993, before we even knew the term. FW de Klerk was still in office.

Today’s Sanlam chairman, Johan van Zyl, believes that Daling sold the future: Van Zyl had to rebuild the group’s presence in the mass market when he bought African Life in 2005.

As for Momentum, it could have ended up being forgotten, along with brands such as Sun Life, Allianz, Prudential Life and Fedsure. But in 1992 it fortuitously hired Rand Merchant

Bank for some corporate finance work. The RMB trio — GT Ferreira, Laurie Dippenaar and

Paul Harris — decided to buy the business instead.

The listed Momentum, which included the operations of both Momentum and RMB, was one of the most expensive shares on the

JSE in the mid 1990s on a p:e of 30 or more. Given that it was also the nursery for what is now Discovery, perhaps it wasn’t so pricey after all.

Momentum was delisted after the formation of Firstrand from FNB, RMB, Momentum and Southern Life in 1998.

Yet Momentum gained little from being part of Firstrand. It became inwardly focused (very far from clientcentric), absorbing large books from Southern Life and then Sage.

Because of the decentralised “owner-managed” culture at Firstrand, cross-selling through FNB was not a priority. Anyway, it was clear that the bank planned to get into insurance and investments in its own right.

At least Firstrand did not impose too many bankers on Momentum management, the exception being the smoothtalking EB Nieuwoudt in 2005.

There weren’t many potential life office mergers in 2010 when Momentum was ready for independence. Metropolitan was the obvious one, and it had expanded into employee benefits, asset management and neighbouring countries since the Nail days. The best news was that there was limited overlap in the target markets.

Results buried in small print

Of course, 1 + 1 does not always make 2. The two asset managers did not combine well, with the team split between Sandton and Tyger Valley.

The investment division results are now buried in the small print, their numbers divided between three sectors — Momentum Retail, Corporate & Public Sector and International.

In the 12 months to June 2017, the headline earnings were

R262m, below its insuranceowned peers such as Stanlib and the Old Mutual Investment Group. But the diversification into Metropolitan’s lower-end market has made sense.

Though earnings were down 6% to R660m for the year, this still outpaced Momentum’s 15% decline to R1.27bn.

The Corporate & Public Sector business might have a dreary name, but it is carrying the group right now, with a 23% increase in its earnings to R835m. It includes some businesses that might be considered noncore, such as Eris property management and development and Guardrisk, which is a different kind of insurance business. It is involved in cell captives, renting out its licence to retailers and other corporates.

The listed Momentum was one of the most expensive shares on the JSE