Proudly sponsored by

Brimstone investigating fraud at Lion of Africa

Has opened criminal cases against some staff.

JOHANNESBURG – Law firm ENS is conducting a forensic investigation at Lion of Africa Insurance, a wholly owned subsidiary of JSE-listed Brimstone Investment Corporation, after suspicions of unsavoury activity in claims and procurement.

Iqbal Khan, managing executive at Brimstone, assumed responsibility for Lion of Africa earlier this year when its CEO, Adam Samie, resigned.

“After I assumed responsibility for the Lion business, and upon closer scrutiny, we suspected some unsavoury activity within the claims and related procurement cycles. The number and frequency of claims appeared irregular. Our suspicions started producing more concrete results and hence we commenced the investigation,” Khan told Moneyweb on Tuesday, after the release of Brimstone’s results for the six months to June 2015.

A number of staff members have been suspended or are under close scrutiny, according to Khan, who said initial indications point to irregular activity within claims and procurement.

Khan said a number of criminal cases have been registered with the SAPS against those people where wrongdoing can be proved from current available evidence.

“Unfortunately I cannot guess when the investigation will be complete as issues continue to surface as we go along,” Khan commented.

He noted that alongside the investigation, Brimstone has launched an “underwriting reform rollout”, which revisits the risks that it writes as polices come up for renewal.

Lion of Africa writes a significant amount of municipal and government business. As of July 1, it will be writing its corporate and local authority business on Zurich South Africa’s paper, which effectively means that Zurich will be the underwriter of these risks.

Khan said the business is undergoing an “operational clean up”. “I believe it’s fair to say Lion is currently going through major surgery,” he says.

For the six months to June, Lion of Africa suffered a net loss of R105.2 million and an underwriting loss of R102.5 million, indicating that it paid a lot more in claims than it collected in premiums.

Commenting on Lion of Africa’s results, Brimstone CEO Mustaq Brey admitted that there was “ill discipline at the underwriting level” and said that most of the top management at Lion of Africa has been replaced.

Brey hopes to appoint a permanent CEO by the end of the year, having shortlisted potential candidates for the position.

For the interim period, Brimstone reported a loss of R480 million after three of its largest investments – Tiger Brands, Life Healthcare and Grindrod – suffered downward revaluations.

Anthony Clark, analyst at Vunani Securities, said Brimstone remains an extremely well managed company with an inherently strong portfolio of brands.

 

VIDEOS

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: