Guardrisk operates in what is called the cell captive insurance market. The firm works with companies in sectors such as retail and telecommunications and provides them with opportunities to sell long- and short-term insurance products.
This model allows retail groups to sell branded insurance products to their clients. Guardrisk does not have a retail footprint. Instead‚ the company uses the infrastructure of companies as a distribution platform.
It also provides risk financing solutions to corporate clients. Its clients include municipalities and medium-sized to large companies.
If you look at Guardrisk‚ it's clearly the leader in its field as a specialist insurer‚ especially in short-term insurance. the deal MMI an excellent diversification opportunity‚" MMI's chief executive Nicolaas Kruger said.
"We did a very thorough due diligence exercise and liked the synergies and cross-selling opportunities we found. We are comfortable we can extract good returns, from this purchase," he said.
In the year to March Guardrisk contributed R348m to Alexander Forbes' net revenue. Its normalised trading profit was R141m. In this period Guardrisk recorded premium growth of 16%, had gross written premium of R9bn and assets under management of R11.5bn.
Guardrisk‚ which has a presence in Namibia‚ South Africa‚ Mauritius and Gibraltar‚ will be merged with MMI's Momentum Ability.
Kruger said the 20-year-old Guardrisk and its management would be kept intact. This means Guardrisk's managing director Herman Schoeman will remain in charge.
"We are hoping to keep Guardrisk as a separate entity. We think it's quite a strong brand and we are keen to continue with that‚" Kruger said. "We don't actually have to change their way of doing business and we don't have to rationalise it or cut staff."
Kruger hopes to finalise the deal by the end of the first quarter of next year once regulatory approval from the Competition Commission has been achieved and the the registrars of long-term insurance and short-term insurance give their consent.
A Johannesburg-based analyst said that at R1.6bn Guardrisk was not cheap but it probably made strategic sense to foster cross-selling opportunities with the employee benefits business within MMI.
Alexander Forbes said it had received expressions of interest from several potential investors. It said net proceeds of R1.5bn would be used to reduce its debt. MMI had excess capital of about R4bn and would use some of that to buy Guardrisk.
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