Rand Merchant Investment (RMI) on Tuesday (10 September) published its results for the year ended June 2019, showing a 4% decline in consolidated normalised earnings, to R4.1 billion.
The investment firm, which owns insurer Outsurance and has a stake in Discovery and Momentum Metropolitan, said that headline earnings declined 7% to R3.8 billion, while headline earnings per share declined 8% to 249.0 cents per share.
RMI said that its result is mainly attributable to the significant increase in spend on new strategic initiatives, an increase in the claims ratio of the short-term insurance operations and the substantial investment in new business growth activities at Outsurance.
It said that compound shareholders’ return since listing in 2011 has amounted to 19.7% per annum.
The board resolved to declare a final dividend of 65.0 cents (2018: 65.0 cents) per ordinary share.
RMI is a strategic active manager of a R52 billion financial services portfolio:
- Discovery – 25%
- Hastings (UK insurer) – 29.9%
- Momentum Metropolitan – 27.3%
- Outsurance – 89.1%
- RMI Investment Managers – 100%
- AlphaCode – 100%
Normalised earnings from Outsurance, including its shareholding in Hastings, decreased by 13% to R2.6 billion, mainly due to higher claims and cost ratios across the group, coupled with a lower earnings contribution from its investment in Hastings, the group said. Excluding Hastings, normalised earnings decreased by 9% to R2.4 billion.
The cost-to-income ratio increased from 25.6% to 28.3%.
“During 2019, the management team made significant investments in marketing and acquisition capability to drive profitable top line growth and build the necessary capacity to support the face-to-face distribution strategy of Outsurance Business. As a result, annualised new business premium written increased by 27%.
“In addition, over the past two years, significant investments have been made to bolster data analytics, information technology and risk and compliance capacity necessitated by the changing regulatory, technology and competitive landscape,” RMI said.
The four AlphaCode investments, being Entersekt, Merchant Capital, Prodigy and Luno, all performed in line with expectations, it said. AlphaCode is RMI’s incubation, acceleration and investment vehicle.
Looking ahead, RMI said that economic conditions in the South African market are expected to remain challenging in the medium term as a result of the recessionary climate and the constrained fiscal position.
“A focus on maintaining pricing discipline and incrementally improving operations remain the best defence during market cyclicality. Outsurance believes that delivering a wider insurance product range coupled with an omni-channel distribution capability will result in continuous profitable growth,” it said.
RMI said that AlphaCode is building on the entrepreneurial legacy record of financial innovation in the group. It said that AlphaCode Incubate has identified and supported 23 black-owned next-generation financial services businesses in the past four years and provided more than R21 million in grant capital to these businesses.
In the last six months, AlphaCode expanded its level of support to these entrepreneurs by making available R23 million of loan funding to three qualifying businesses.