- Rand Merchant Investments says OUTsurance and UK-listed short-term insurer, Hastings, have shown remarkable resilience under Covid-19.
- The investment holding company, which unbundled from RMB Holdings in 2010, says will only be receiving dividends from OUTsurance and Hastings for the year ended in June as Discovery and Momentum Metropolitan are preserving cash.
- RMI says OUTsurance plans to offer a "a wider product set" in 2021.
RMI, which manages a R44.7 billion financial services portfolio, released its financial results for the year ended on 30 June on Friday. It praised OUTsurance and its UK-listed short-term insurer, Hastingsm for their "remarkable resilience" in a sector that has been bleeding because of provisions for Covid-19 claims and lapses.
RMI, whose other investments include Discovery, Momentum Metropolitan, RMI Investment Managers and tech start-up incubator AlphaCode, said the strategic partnerships that OUTsurance entered into this year, as well as its decision to provide more than just motor insurance, has positioned it well to deal with Covid-19 disruption, even under a protracted pandemic scenario.
OUTsurance, which began as a motor insurer, has diversified into property, commercial and life insurance in recent years. Its investment business, OUTvest, also launched a retirement annuity in January this year featuring a fixed fee that promised to be the lowest in the market.
"The focus for 2021 will be a continuation of investment towards multi-channel distribution and the delivery of a wider product set to clients," wrote RMI regarding OUTsurance's plans.
OUTsurance Life is also counting on its new partnership with Shoprite to steal market share from traditional life insurers. RMI said OUTsurance and Hastings were the only two investments it would be receiving dividends from.
Discovery and Momentum Metropolitan are in cash preservation mode in anticipation of increased claims as a result of Covid-19. The two decided not to declare a final dividend after raising provisions for anticipated Covid-19 claims and lapses. RMI owns a 25% stake in Discovery and 27.3% in Momentum Metropolitan.
The combination of no dividends, increased costs and the declines in earnings of all RMI's biggest investments – Discovery, OUTsurance, Momentum Metropolitan and Hastings – caused the group's normalised earnings to fall by 24% to just over R3 billion.
RMI says normalised earnings are the most appropriate way to evaluate its performance because they don't include non-recurring items. But the other measures of profitability showed a much bigger deterioration in the company's profits. Its headline earnings fell 49% and the group's profit for the year fell by 56% to R1.9 billion.
RMI said because of the "heightened medium-term economic and insurance-related uncertainty" it has also revised its own dividend policy and concluded that it will be prudent not to declare a final dividend this year.