OUTsurance Group (OGL), a growing, short-term insurance group operating across South Africa and Australia, lifted its annual dividend more than 100% to 134.8 cents (6.5 cents) a share for the year to June 30, and shareholders also benefited from an 8.5 cents special dividend.
OGL’s normalised earnings from continuing operations were up a substantial 62.2% to R2.88 billion.
Last December Rand Merchant Investment Holdings (RMI) changed its name and started trading as OUTsurance Group on the JSE, as part of a managed transition following the sale of the group's interest in Hastings in December 2021 and the unbundling of the interests in Discovery and Momentum Metropolitan Holdings to OGL shareholders in April 2022.
As at June 30, OGL owned an 89.8% equity stake in OUTsurance Holdings (OHL), 100% in RMI Investment Managers, which is invested in a group of independent boutique asset managers, and a venture capital portfolio with investments in Entersekt, Prodigy Finance, Merchant Capital and Guidepost.
The directors' valuation for the investments in RMI Investment Managers, the venture capital portfolio and other assets at OGL level, which includes cash of R839 million, was between R2.7bn to R3.1bn.
The group’s management said in the results that the full year dividend was representative of the simplification of the OGL structure following the sale and unbundling of previous interests, the settling of debt and the reduction in head-office costs.
The special dividend represented the dividends received by RMI Investment Managers over the financial year.
Marthinus Visser, OUTsurance Holdings (OHL) CEO said: “The 2023 financial year was marked by strong revenue growth on account of the continued delivery of our strategy to scale our wider product set through all three major channels – digital, call centre and face-to-face.”
He said this strategy had unlocked a significant growth runway in South Africa and Australia.
The planned expansion to Ireland, still subject to regulatory approval, provided further long-term growth potential, he said.
Profit growth was also due to more favourable weather-related claims in Australia as well as action to combat a sudden reset in vehicle accident frequency as well as higher claims inflation, load shedding, vehicle theft and reinsurance cost.
“We managed to steer growth segments towards profitability through a clear focus on cost efficiencies, scale and claims ratio improvements,” he said.
He said the economic environment was expected to remain challenging.
OHL’s gross written premium increased 21.1% to R28.5bn benefiting from organic growth, higher premium inflation and a weaker rand.
OHL delivered 17.2% new business premium growth aided by the higher inflationary environment.
New initiatives, including OUTsurance Brokers, Youi’s underwriting partnership with Blue Zebra Insurance (Youi BZI), OUTsurance Life’s entry into the funeral market, and Youi’s Compulsory Third Party (CTP) product, accounted for 46% of the new business premium written.
Operating profit rose 41.7% to R4.1bn, mainly due to a 2.5% reduction in the net claims ratio from 56.1% to 53.6%, and the benefit of the substantial premium growth.
Youi delivered strong gross written premium growth of 31.4% and 21.5% measured in rand and Australian dollar terms respectively. This was supported by the BZI initiative which contributed 17.6% of Youi's gross written premiums in 2023.
Youi’s claims ratio fell significantly to 56.4% from 50.8% in 2023 mainly due to contrasting weather experience between the two financial years.
The cost-to-income ratio decreased from 33.5% to 31.6% driven by the higher revenue growth and improved cost containment.
Youi's investment income increased to R365m from R12m as a result of the rapid increase in interest rates. Investment income was further aided by a stronger performance in Australian equities compared to the prior year.
OGL's head office costs fell to R80m from R134m.
On expansion into Ireland, the group said: “Our team is hard at work preparing for a market entry in the first half of the 2024 calendar year. The Irish insurance market has a good track record of profitability and presents market attributes which meet our criteria and business model design.”
At the end of last October OHL exercised an option to acquire the remaining 50% of Youi shares not owned by it, for A$42.5 million. The total net asset value of Youi on June 30 was R5.88bn and the taxed profit was R1.40bn.
“We believe the general insurance market will continue to experience real growth because of factors like climate change, the proliferation of solar panels and the increasing market penetration of electric vehicles driving real claims cost increases,“ the group said.
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