JOHANNESBURG, June 12 (Reuters) - South African life insurer MMI Holdings said it will start offering loans and take deposits as part of a deal with lender African Bank, as it looks to revive declining profits.
MMI, the No. 3 long-term insurer in South Africa, has seen profits drop for the past two years as weak growth and poor investment returns weighed on revenues.
The insurer plans to use African Bank to build up a loan book in excess of 10 billion rand ($780 million) over the next five years and to share the profits equally with the bank.
“African Bank will be the exclusive provider of consumer credit products to MMI, for solutions falling within its product range,” MMI said, adding that the lender will use the insurer’s existing sales channels.
African Bank, a lender that grants loans not backed by assets, was rescued and recapitalised by South Africa’s central bank after its parent African Bank Investments Limited collapsed in 2014.
In April last year, the bank was split into a “good” business aimed at attracting new clients, and a new company to mop up old debts.
“African Bank will act as sponsoring bank to facilitate deposit-taking and extend transactional banking capabilities that MMI wishes to offer to its clients,” the insurer said in a statement.
MMI also plans to sell to African Bank’s clients, making its full range of insurance products available to African Bank account holders, with the goal of generating more than 1 billion rand in premiums within five years. ($1 = 12.8432 rand) (Reporting by TJ Strydom; Editing by Susan Fenton)