Capitec gets go-ahead for big insurance acquisition

Capitec has received approval from the Competition Commission to buy Guardrisk Life’s life insurance business as the bank looks to expand further into the life insurance industry.

In April this year, Capitec Bank announced its plans to launch a new life cover product in June.

This came as the bank reported a 12% increase in profit after tax for its insurance business, growing from R2.68 billion to R3.17 billion, in its 2024 financial year.

Capitec CEO Gerrie Fourie said at the bank’s results presentation that the life product was being piloted among its employees, and about 15% of staff have taken up the product.

“If I look at insurance, it’s for us all about the new systems that we’re building. It is bringing the whole Sanlam business across, making certain we’re ready for new products that we can actually attack the market from next year on,” Fourie said.

Moonstone reported that Capitec obtained its own long-term insurance licence in its 2023 financial year and began issuing credit life insurance policies in May 2023. 

Before then, Capitec’s credit insurance policies were underwritten by Guardrisk.

The transfer of the credit life insurance policies from the Guardrisk cell captive to Capitec Life is expected to be completed by July or August, Fourie said.

By the end of February 2024, Capitec had 558,417 active policies issued on its own licence. 

The average sum insured increased by 3% to R75.2 billion. The net result from credit life insurance was up by 13% to R1.9 billion.

On 1 August 2024, the Competition Commission announced that it has recommended that the Competition Tribunal approve Capitec’s proposed acquisition of the credit life insurance business underwritten in Guardrisk Life’s cell structure.

The primary acquiring firm is Capitec Life, which is a wholly-owned subsidiary of Capitec Bank Holdings. 

Capitec provides banking and insurance services. Of relevance to the proposed transaction, Capitec also provides credit life insurance through its own licence.

The business Capitec is looking to acquire provides credit life insurance products to the bank’s clients only through a cell captive arrangement. 

In terms of this arrangement, Capitec is responsible for the marketing, distribution and sale of credit life insurance policies to its banking clients only. 

Capitec is also responsible for the administration of the credit life insurance policies issued to its banking clients.

The bank’s acquisition target is controlled by Guardrisk Life, which is ultimately a wholly-owned subsidiary of Momentum Metropolitan Holdings.

Capitec is looking to acquire the credit life insurance business conducted pursuant to a cell captive insurance arrangement between Guardrisk Life as the underwriter and Capitec as the distributor of credit life insurance policies to its banking clients.

“The Commission is of the view that the proposed transaction is unlikely to substantially lessen or prevent competition in any market,” it said.

“To address public interest concerns, the Acquiring Group has made commitments to provide funding to firms owned by historically disadvantaged people.”