RAND Merchant Investment Holdings (RMI) declared an ordinary and special dividend increase of more than 100 percent to 165.5 cents per share in the six months to December 31 as shareholders continue to benefit from ongoing steps to unlock value.
And in a further development yesterday, RMI said it would list short-term insurer OUTsurance. This would give RMI a simpler structure, provide a more focused OUTsurance management team, a higher dividend payout ratio, reduce personnel and holding company costs by R25m to R30m over the next six months, and enable a special dividend of R2.18bn to be declared.
RMI’s share price surged 6.07 percent to R48.20 yesterday.
RMI chief executive Herman Bosman said: “In a way we are pleased to conclude the best opportunity for RMI shareholders in the short term insurance market lies in our own home-grown champion OUTsurance. It is logical, in line with our commitment to maximise value, for RMI to step back and afford shareholders direct access.”
On September 20 last year the group announced the unbundling of its investments in Discovery Limited (Discovery) and Momentum Metropolitan Holdings (Momentum Metropolitan), and on December 8, the sale of its 30 percent interest in Hastings Group (Hastings) for R14.6 billion.
At the time RMI said it wanted to create a portfolio of unlisted short term insurance businesses, but a country and company analysis showed there were no suitable actionable opportunities, hence a decision to list OUTsurance.
RMI said the implementation of the unbundling would see R33.4bn returned to shareholders, based on the market capitalisation of Discovery and Momentum Metropolitan or R21.83 per share, as at March 11. The unbundling was expected to be implemented before the end of April this year.
Since the unbundling announcement, RMI has traded at only a 2 percent discount to intrinsic net asset value, having previously traded at a 30 percent discount previously, which meant a 28 percent value unlock.
RMI’s share price has also increased 54 percent in the six months, compared with only 17 percent of the JSE All Share Index and a 6 percent increase in the Life Insurance Index.
In addition, the sale of the stake in Hastings meant RMI no longer needed a rights issue to give effect to the unbundling, and it meant RMI was able to increase its dividend payout ratio, as well as leave R800 million in cash at the end of December 31, as well as R4.1bn cash in OUTsurance.
After the unbundling, RMI will mainly comprise OUTsurance, alongside investments in RMI Investment Managers and the AlphaCode portfolio of fintech companies.
Options available for RMI Investment Managers and the AlphaCode portfolio companies were being reviewed.
RMI said it had produced a shareholders' return of 17.9 percent per annum since listing in 2011, and its market capitalisation increased 41 percent in the six month period to R69.2bn. Its intrinsic net asset value increased 14 percent to R76.3bn.
Normalised earnings from OUTsurance, excluding its stake in Hastings, decreased by 23 percent for the six months. Annualised new premiums written increased by 18 percent to R3.4bn and gross written premiums increased by 14 percent to R11.6bn.
OUTsurance's local operations were negatively impacted by an increased claims ratio as a result of wetter weather, increased non-motor claims costs and the further normalisation of motor claims frequencies.
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