Momentum and Metropolitan insurers Merger risks

Insurers' merger threatens 1 500 jobs  

By Mzwandile Jacks

Life insurers Metropolitan and Momentum could cut a combined 1 500 jobs or 10 percent of the workforce as the companies wrap up a merger set to create the third-biggest JSE-listed insurer.

There was "a bit" of an overlap in some business areas and these cuts were aimed at increasing the companies' focus on revenue and efficiency, said Nicolaas Kruger, the chief executive of Momentum.

"There could be a 10 percent staff reduction in the merged entity. This will be done through voluntary retrenchments among other things."

The combined unit will have a staff complement of 15 000 people.
But the group communications executive at Momentum, Dan Moyane, said that the 10 percent figure was the estimated maximum job cuts that the two entities had submitted to the Competition Commission.

"The actual number could be much smaller than this because not all the people would be retrenched. Some would be retrained and redeployed," added Moyane.

South Africa's life insurers are vying for a bigger slice of the life industry's annual premium income. Since June last year to June this year the life industry has generated premium income of R190.5 billion.

Not only would the merger generate economies of scale and other business synergies, including wide-ranging cross-selling opportunities, but it would also result in enhanced capital efficiencies and greater risk diversification, the companies said in a joint statement.

The combined unit will be called MMI Holdings, a name that will only apply to the listed entity. The brands of Momentum and Metropolitan will continue to be used in the client-facing businesses.

Kruger will become the chief executive of the merged entity, while Metropolitan chief executive Wilhelm Van Zyl will be his deputy.

The chairman and deputy chairman of the board will be former chairman of FirstRand Laurie Dippenaar and Metropolitan Health board member JJ Njeke, respectively.

Their appointments will be for one year.

In total, there will be four executive directors and sixteen non-executive directors.

Following implementation of the merger, FirstRand shareholders will hold 59.3 percent and current Metropolitan shareholders 40.7 percent of the shares of the merged entity.

Based on this ratio, when FirstRand's stake in the merged entity was unbundled, FirstRand shareholders could expect to receive 16.9 shares in the merged entity for every 100 ordinary shares held in FirstRand, said Van Zyl.

Van Zyl said: "My hopes for MMI Holdings are high as I do not doubt its capacity and capabilities to exceed stakeholder expectations through expanded product offerings in extended local and international target markets."

Both the merger and the unbundling remain subject to shareholder approval at general meetings that will take place on September 28, as well as approval by the Competition Tribunal.

The share price of Metropolitan surged 1.57 percent to R16.50 yesterday, valuing the insurer at R8.94 billion


Source - BUSREP.CO.ZA


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