RMI puts its eggs in the OUTsurance basket
Rand Merchant Investment Holdings’ plans to change its JSE listing to OUTsurance — its “crown jewel” and a significant player in the insurance industry — will simplify its structure and deliver value for shareholders, RMI said.
The move, unveiled this week, will see RMI transition from an investment holding company into a structure that in effect will list OUTsurance on the bourse, not as a separate IPO but as an entity focused on RMI’s last major asset as opposed to having a range of legs in its portfolio.
With no investment or acquisition prospects likely in the short term, RMI said OUTsurance “could, in time, drive international expansion independently should attractive opportunities arise”.
Speaking on the sidelines of the announcement of financial results for the six months ended December 2021, RMI CEO Herman Bosman said that, simply put, the group will have a name change from RMI to OUTsurance.
“OUTsurance is a fantastic asset, it is a high-yielding asset and has growth aspirations both in Australia, SA and one other country that we will be building a shortterm insurer in. It has a very experienced board and management team. We are essentially letting it run in front of the pavilion now instead of trading behind it. It is going to be the focal point going forward,” he said.
The move comes after RMI over the past two years has unbundled its interest in Discovery and Momentum Metropolitan (MMI) and sold its stake in UK-based personal insurer Hastings Insurance, which was announced in December 2021.
The group said shareholders had benefited, with the share price increasing 54% during the period. RMI declared an ordinary and special dividend of R2.54bn or 165.5 cents a share in the six months ended December 2021. Combined with the unbundling of Discovery and Momentum Metropolitan, RMI will be delivering R36bn to shareholders or R23.48 a share. RMI also scrapped plans for a R6.5bn rights issue aimed at reducing debt prior to the unbundling of Discovery and MMI, after proceeds from the sale of Hastings were used to repay all the preference share debt.
In the six months to December, OUTsurance’s annualised new premiums written increased by 18% to R3.4bn, and gross written premiums increased by 14% to R11.6bn. However, its claims ratio climbed in its South African operations due to wetter weather conditions, among other factors. It recorded a surge in the claims ratio from 53.4% to 62% due to natural disasters, including the Melbourne earthquake, hail and flood events.
Analysts expect OUTsurance to continue gaining market share.
Patrice Rassou, chief investment officer at Ashburton Investments Management, said the discount to net asset value has been 10% approximately despite having unlisted assets. “OUTsurance has been successful due to its competitive offering in a constrained economic environment, so it should continue gaining market share,” he said.
Portfolio manager at Vestact Asset Management Michael Treherne agreed, saying OUTsurance had been successful due to its competitive offering in a constrained economic environment. “OUTsurance has a very good brand in SA and has shown good growth so far. You have to give the management team the benefit of the doubt that they will continue to do well in a congested industry,” he said.
Treherne said in the next month Discovery and MMI will be spun out of RMI, effectively making it only OUTsurance with two small side bets in Alphacode and RMI Investment Managers. “The RMI share price going forward will be driven solely by OUTsurance’s performance. One of the main reasons for owning RMI over the last few years was for the NAV value unlock. That value unlock has now happened, investors now need to decide if they are happy only betting on OUTsurance,” he said.
RMI said that going forward, options for RMI Investment Managers and the AlphaCode are under review.
OUTsurance is going to be the focal point going forward
Herman Bosman
RMI CEO