Guardrisk purchase by MMI could solve its rating risk

Fitch has also maintained Guardrisk Insurance’s Mauritius-based subsidiary Guardrisk International Limited PCC’s (GIL) International IFS rating of ‘BBB’ on RWE. This follows the announcement of the MMI group’s intention to acquire Guardrisk for ZAR1.6bn, (US$156.8m) subject to regulatory approval by the competition authorities and the relevant regulators. Fitch views Guardrisk Insurance, Guardrisk Life and GIL as ‘Core’ to the Guardrisk group. Fitch placed Guardrisk’s ratings on RWE on 25 July, 2013, reflecting the uncertainty of future ownership at the time following Alexander Forbes announcing its intentions to invite expressions of interest in Guardrisk.hideThe RWE will be resolved upon completion of the acquisition by MMI as expected. On acquisition, Fitch would consider Guardrisk to be strategically ‘Important’ to the MMI group. Fitch believes Guardrisk would benefit from being part of the larger MMI group, including potential cross-selling opportunities. Also, MMI is likely to draw benefits from Guardrisk’s strong relationships with corporates and contributing to its overall strategic objective of diversifying its business profile. Fitch believes that there is limited integration risk given the nature and scale of the acquisition. The MMI group reported total equity of ZAR23.9bn and net earnings of ZAR2.7bn for the year ended 30 June, 2013. The acquisition will be funded from MMI’s existing capital buffer. Financial services groups, Alexander Forbes and MMI Holdings Limited (MMI) announced the sale on 4 November and said the conclusion of the transaction is subject to, inter alia, regulatory approvals by the Financial Services Board and the competition authorities. SUCCESSFUL BID MMI, a JSE-listed financial services group, is the successful bidder from a list of several investors who expressed an interest in acquiring Guardrisk, a wholly-owned subsidiary of Alexander Forbes. Edward Kieswetter, Group Chief Executive, Alexander Forbes Ltd, said: “The sale of Guardrisk was considered in the context of positioning the Alexander Forbes Group for growth in its employee benefits, investment and risk benefits institutional businesses, as well as leveraging off that established client base into three key growth markets: retail (individuals), the public sector and Sub Saharan Africa. This transaction will further enable us to deliver on our promise of securing the financial wellbeing of our clients—now and into the future.” Nicolaas Kruger, Group CEO of MMI, added: “The acquisition of Guardrisk is an important milestone to support our strategic intent to diversify our business to enable further growth. The Guardrisk transaction enables MMI to provide a comprehensive and exciting suite of specialist insurance solutions in the alternative risk transfer space to our large corporate clients and brokers. This enhanced product offering will be complementary to the innovative product offering of Momentum Employee Benefits.” Herman Schoeman, Guardrisk Managing Director, who will continue to lead the company along with his current management team, said he is excited about the future prospects of Guardrisk under the MMI umbrella. “We have been a leader in the specialised insurance industry since our inception and we look forward to unlocking synergies and providing value enhancing products and services to our current and future clients. Our highly experienced employees will also have the opportunity to contribute their unique skill set to MMI. “We are comfortable that we will extract revenue synergies from the Guardrisk transaction, which are expected to enhance MMI’s earnings and grow embedded value over time,” concluded Mr Kruger.

Guardrisk purchase by MMI could solve its rating risk

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