Edward West
30 June 2008
Johannesburg — INVESTEC, the specialist banking group, planned to sell the short-term insurance businesses of Investec Private Bank to leading South African short-term insurer Santam, the companies said on Friday.
A memorandum of understanding had been signed and a sale agreement was expected to be concluded in a month.
Santam executive head of people and branding Margaret Massie said the sale "is definitely a good thing" for Santam. It had been prompted by Investec wishing to concentrate on its core business, and from Santam's point of view, it was pleased to be associated with the Investec brand.
Massie said the short-term insurance business from Investec was "a fair size". The specialist banking group was one of the independent brokerages that contributed up to R700m to Santam's consolidated annual premium income of about R13bn.
"The businesses will be bought into a new entity of which Santam will initially hold a 100% shareholding," Santam CE Ian Kirk said. "Negotiations are under way to appoint an independent third party to assist us with the management of certain aspects of the new business," he said .
Massie said Santam had underwritten Investec's short-term business for a number of years and the partnership "has been a good one".
Kirk said: "The Investec businesses represent a substantial income stream for Santam... this was an ideal opportunity for us."
Investec Private Bank SA head Paul Hanley said the decision followed a strategic review that found the insurance business was non-core to the private banking business model.
"We are pleased to have entered into this arrangement with Santam, which will not only benefit our clients and our staff, but will ensure the sustainability for this business ," Hanley said.
Both Hanley and Kirk said the transaction should not affect the day-to-day management of their insurance affairs.
Santam told shareholders at the end of last month that headline earnings for the year to date had been below expectation , primarily due to lower investment returns, but overall growth and underwriting profit had been satisfactory.
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