Holding group Rand Merchant Investment (RMI) says it is in the process of transitioning and rebranding RMI to OUTsurance Group, following the unbundling of its investments in Discovery and Momentum Metropolitan and the sale of the group’s 30% stake in Hastings Group.
RMI is a JSE-listed holding company with significant investments in insurance, asset management and fintech companies, including AlphaCode.
“Fiscal 2022 was truly memorable in RMI’s eventful history,” the group said in a statement Thursday (September 22).
Strategically and structurally, historic decisions were made to unbundle its shares in two strong South African life insurance brands, Discovery and Momentum Metropolitan, to sell its investment in the lucrative UK market, Hastings, and not to pursue an active investment strategy and further geographic expansion, but to begin an orderly and managed transition to a structure that represents an effective list of OUTsurance.”
RMI said it has created significant shareholder value as a direct result of these strategic decisions when reporting its financial results for the year ended June 2022.
As of June 30, 2021, RMI’s market capitalization was RMI 48 billion. A year later, on June 30, 2022, the market capitalization of RMI was RMI 42.6 billion, after the unbundling process.
In addition, RMI said it paid a special dividend of R2.2 billion and a normal dividend of R1 billion. The group said its total shareholder return since its 2011 listing was 453.5%.
The group reported a regular dividend that was up 46% to 65.5 cents for the financial period, while special dividends were 142 cents in cash.
Reason for OUTsurance transition
Over the past two years, RMI said it has evaluated the creation of a portfolio of privately held, uncompetitive and collaborating companies in the short-term insurance industry.
It said it conducted a detailed country and business analysis to identify potential target investments and found no viable investment opportunities that meet RMI’s expectations regarding asset quality, price and availability.
“RMI’s board of directors has concluded that it is in the best interests of shareholders not to continue with the active investment strategy and has decided to make an orderly and controlled transition to a structure that represents an effective listing of OUTsurance “, it said.
OUTsurance could eventually stimulate international expansion independently, should attractive opportunities arise.
The managed transition will be accomplished by renaming Rand Merchant Investment Holdings Limited to OUTsurance Group Limited.
RMI’s investments in RMI Investments Managers and the AlphaCode fintech portfolio will be transferred to RMI Treasury Company Limited (a wholly owned subsidiary of RMI), and its investment in OUTsurance will remain under OUTsurance Holdings Limited.
The managed transition is expected to result in the following key benefits for RMI’s shareholders:
- Simpler operational structure with a single point of access to OUTsurance;
- A cost-effective way to effectively complete an initial public offering (IPO) of OUTsurance and maintain the group’s empowerment credentials;
- More focused OUTsurance management team with direct accountability to shareholders;
- Higher dividend payout ratio;
- A phased reduction in holding and personnel costs at RMI until March 2023, after which the only remaining costs will relate to the costs associated with being a publicly traded entity; and
- This allowed RMI to release $2.2 billion to shareholders as a special dividend.
OUTsurance expects the global and local economic background to remain volatile for the foreseeable future. Its main strategic focus for fiscal year 2023 is to drive growth initiatives toward profitability and target margins, it said.
“The international expansion initiative is gaining momentum and a permit application will be submitted in 2023 along with launch preparations.”
The group said the transition to listing from RMI to OUTsurance is “an important undertaking” and is expected to be largely completed by December 2022.
“The vision of RMI Investment Managers is that the portfolio is largely complete. However, they remain opportunistic and continue to explore the addition of affiliates to either resolve additional exposure or underexposure in certain asset classes or add value to the portfolio,” the group said.
Read: RMI to list OUTsurance activities