MMI Holdings and African Bank have announced a partnership that will allow each other exclusive rights to sell their products to the combined client base.
“The value sharing partnership is based on three business lines, including lending and insurance business ventures. The third venture will involve the provision of transactional banking capabilities to enable the MMI value proposition,” read the statement released on Monday.
Essentially what it means is that African Bank will have exclusive rights to provide needs-based unsecured credit to MMI clients. In turn, MMI will have exclusive rights to offer insurance products through African Bank distribution channels. “The loans will be written into a joint venture where profits will be split 50/50. Insurance policies will be issued on Metropolitan’s insurance licence and we will share in profits as they emerge on a 50/50 basis as well,” says Risto Ketola, head of Business Performance Management and Investor Relations at MMI Holdings.
The partnership is an extension of an existing commercial relationship between the two in which Guardrisk (a subsidiary of MMI) underwrites credit life insurance sold through African Bank via a cell-captive structure.
The so-called third-venture “will involve the provision of transactional banking capabilities to enable the MMI value proposition” according to the statement. “In July, MMI will launch a Multiply Visa Card. The card will allow HealthSaver account-holders to receive real time access to their funds at health care providers, pharmacies and vets. The focus will be on selling loans and life insurance solutions,” says Ketola.
“The value add to African Bank customers will be that they will eventually be able to access the entire remit of insurance products provided by MMI. African Bank currently does not have fully accredited staff across the distribution network to offer advice-based insurance products. Partnering with MMI allows us to significantly expand the offering and expertise offered to customers. From the second half of 2017, Metropolitan clients will be able to access unsecured credit from within certain of their branches. This credit will be based on the African Bank credit policy. MMI clients will be able to fulfil their financial wellness goals through the access of unsecured credit. African Bank are not considering offering home loans at present. The Metropolitan and African Bank customer base are very similar. The MMI customer base is however different, but the banks’ strategy has stated the intention for the Bank to target such low-risk customers,” African Bank said in response to our questions.
The arrangement has ambitious targets – the insurance venture is aiming to generate in force premiums in excess of R1 billion within five years, while the two companies expect to build a loan book from the joint venture in excess of R10 billion over the same period.
Ketola describes the value proposition as such: “On the loans, we plan to differentiate the offering by integrating it with our Multiply programme. This will reward clients for meeting their commitments and for improving their overall financial position as measured by one’s Multiply status. On insurance, the client will have the convenience to purchase/service their insurance products in African Bank branches which improves the convenience factor.”