Momentum Metropolitan Holdings has entered into an agreement to acquire the Alexander Forbes Short-term Insurance business (AFI), making the group a significant player in the short-term insurance market.
The acquisition price is around ZAR1.94bn ($136m).
"This strategic acquisition is in line with Momentum Metropolitan’s overall Reset and Grow strategy, and specifically aims to fast track growth of the short-term insurance interests of the Group. Momentum Metropolitan’s portfolio of businesses already commands substantial market share in the life insurance, investments, corporate and health product and advice arenas. This transaction now makes the group a significant player in the short-term insurance market," said Mr Hillie Meyer, CEO of Momentum Metropolitan, in a statement.
Mr Herman Schoeman, CEO of Momentum Metropolitan’s non-life insurance portfolio, said, "In a lower growth market, size and scale is imperative for sustainable profitability. An acquisition of this nature and quality rarely occurs in the South African short-term insurance market and we are excited by the opportunities it presents".
Strategic benefits of deal
Strategic benefits of the transaction include:
- It adds immediate and significant scale to the group’s retail short-term insurance business: the transaction will more than double its client base to 150,000 policy holders.
- Momentum Metropolitan has identified short-term insurance as an industry segment into which the group will invest capital to support its growth aspirations. This transaction accelerates and broadens the sustainable growth plans for this market segment.
- Supplementary to added scale, the transaction unlocks efficiencies and provides cross-sell opportunities, which will further strengthen growth prospects.
Mr Schoeman highlights the intention to create an integrated retail short-term insurance unit, combining its current short term insurance business unit and AFI: “The integrated business will trade under the Momentum brand, using one insurance licence”.
The proposed transaction is subject to regulatory approvals.
Alexander Forbes put its insurance business, which it had identified as not part of its core business, on sale in March.