Momentum Metropolitan’s (MMH) nearly R2 billion deal to buy Alexander Forbes’ short-term insurance business has run into problems less than 5 months after the deal was sealed.
The R1.9bn deal which was first announced in July 2019 was concluded in January.
However, an affidavit by Insurance broking and risk management firm Marsh, which has been a mainstay partner of Alexander Forbes Insurance (AFI) shows the firm was already planning to take some of its clients to Discovery Insure when the deal was still being trashed out.
Marsh is a wholly owned subsidiary of US-based Marsh & McLennan Companies. Marsh in 2011 bought the brokerage business of Alexander Forbes for an undisclosed amount.
The details of the breakdown of the more than 30 years business relationship between AFI and Marsh are contained in an affidavit by Selven Govender, executive head: consumer and commercial at Marsh.
Govender on behalf of Marsh wants the Joburg High Court to interdict AFI from communicating directly with its clients.
Govender states that the company’s relationship with AFI is governed by two agreements, the binder agreement and intermediary agreement, the latter which allows Marsh to market AFI’s policies to its clients acting as an agent of its clients.
Govender said Marsh in September 2019 undertook a product comparison of short-term solutions available in the market and found that Discovery Insure offered a better overall proposition for its clients.
“This led to a decision that the applicant (Marsh) would recommend to certain clients that it would be beneficial to move their insurance to Discovery Insure. In taking this decision the applicant fulfilled its obligation to give appropriate advice to clients regarding their insurance,” reads Govender’s founding affidavit.
Govender’s affidavit goes on to read that Marsh communicated its decision to AFI in a meeting held on the fourth of last month. Amongst the attendees at the meeting were Marsh’s CEO Spiros Fatouros and the recently appointed CEO the combined AFI and Momentum Short-term Insurance businesses, Brand Pretorius.
The two businesses, AFI and Momentum Short-term Insurance are still integrating and enhancing product offerings, which once concluded, will trade under the Momentum brand, using one insurance license.
Govender said Pretorius showed his displeasure at Marsh’s decision after which AFI went on to terminate Marsh’s access to the Mertrix system – the system used by Marsh to load, cancel orl amend client policies.
“The respondent’s (AFI) conduct in taking advantage of its control of the Mertrix system to impose its will on the applicant by unilaterally terminating the applicant’s access to that system without any legal right to do so is conduct that offends the morals of the market place and the legal convictions of the community, and is therefore unlawful,” reads Govender’s affidavit.
“Likewise the communication the respondent has engaged in with clients, to the extent it contains false or incorrect information, inaccurate comparative advertising and is disparaging of the Discovery Insure product in breach of the Regulations, is unlawful in relation to the applicant as it constitutes unlawful disparagement of the applicant’s offering and the spreading of injurious falsehoods.”
Pretorius said MMH and Marsh have a longstanding relationship that stretches across multiple product ranges and business areas in MMH and that the current dispute is limited to the newly acquired AFI business.
“At no time, between July 2019 when MMH announced that it would be acquiring AFI’s business and end April 2020, during any of the operational or management discussions between the parties, did Marsh give any indication that they were busy with an investigation to move their entire book to another insurer,” Pretorius said.
“They also did not engage MMH to understand the benefits that would be unlocked, both for clients and intermediaries, following the integration of the AFI business with MMH’s Momentum Short-term Insurance.”
Pretorious further contends that the actions by Marsh led to the cancelation of the intermediary and binder agreements and Marsh ceased to act as an agent of AFI and therefore lost its benefits and access to the AFI systems (Mertrix).
“The removal of system access follows the termination of the agreements. In this regard AFI as an insurer has the legal right and obligation to communicate directly with its clients on all matters that affect their policies.”
Marsh & McLennan, through its subsidiary Mercer has until recently been Alexander Forbes’ (AF) largest shareholder with a 30.59% stake – until Patrice Motsepe’s investment vehicle African Rainbow Capital (ARC) increased its holding in AF from 13.7% to 28.6% after buying 193 million AF shares from Mercer in a transaction worth just more than R1 billion.
