South Africa’s life insurance industry marked another major step in its consolidation on 1 December 2010 with the listing on the Johannesburg Stock Exchange of MMI Holdings.
MMI is the product of a merger between two mid-size life insurers, Momentum and Metropolitan, and creates the country’s third-largest life insurer after Old Mutual and Sanlam.
Following the merger, shareholders of banking group FirstRand, Momentum’s former parent company, now own 59.3% of MMI and Metropolitan shareholders 40.7%.
Though dubbed a merger, it is not one of exact equals with Momentum accounting for some 60% of MMI’s embedded value of ZAR30bn ($4.4bn). Total assets under management stand at ZAR400bn.
The merger is unlikely to be one of the easiest to bed-down with Metropolitan’s roots firmly in the lower-end of the life market and Momentum focused on upper-income segments. Notably, MMI will retain the dual-brands with Momentum retail and Metropolitan retail forming two of its six business clusters and each with its own chief executive. The other four clusters are investments, employee benefits, health and the primarily African-focused international.
Also to be overcome are administrative challenges, not the least being that Momentum’s head office is in Johannesburg while Metropolitan’s is some 1,000 miles away in Cape Town. Plans to cut costs by trimming the combined staff complement of 15,000 by 1,000 have also been stymied by the Competition Tribunal which has ruled that no job cuts may be made during the first two years following the merger.
Despite challenges, MMI group CEO Nicolaas Kruger presented an upbeat outlook following MMI’s listing.
“I believe our African footprint will offer us a wealth of exciting growth opportunities,” said Kruger.
“Whereas Metropolitan has a well-established retail presence in seven African countries, Momentum has built a health and employee benefits presence in 11 African countries,” he added. “This combination allows for collaboration that will create a broader geographic presence, and provide a greater diversity of products in these and other African countries.”