Hollard Insurance Acquires Etana Insurance
The Hollard Group has recently received regulatory approval from the Financial Services Board (FSB) to complete the acquisition of Etana Insurance. Upon completion, Hollard Insurance will increase its share in Etana Insurance from its current minority stake of 40% to full 100% ownership. The new division, which will be named "Hollard Broker Markets" will put its full focus towards insurance brokers and those brokers clients' personal, corporate and commercial insurance needs.
Acquisition fuels hope for future growth
Hollard Insurance, founded in 1980, is currently one of South Africa’s largest privately-owned insurance groups. The acquisition of Etana will strengthen Hollard’s market position and could potentially allow the group to finally snag the number two spot in the national market held today by Mutual & Federal.
Until 2007, Etana, a leading provider of broker-driven corporate, commercial and personal lines of insurance products, had been a unit of Hollard. At that time, 60% of Etana was spun off in a move which preceded amazing success for Etana. Incredibly, the unit reported triple digit growth over the past six years, successfully overcoming the significant challenges of operating in the local insurance market.
Hollard Group CEO, Nic Kohler, has declared Hollard Insurance’s belief that the new business will complement and enhance Hollard’s existing business insurance offerings. In Kohler’s view, the newly formed entity will draw together each unit’s skill sets in a market hampered by a lack of these professional skills, create an expanded product range, and raise underwriting capacity. A further motivation for the acquisition is revealed in Kohler’s claim that the move will strengthen Hollard's position in a difficult market.
In contrast to Kohler’s tone of guarded optimism, a recent insurance industry survey, which was published exclusively by Carinfo.co.za The best insurance company in South-Africa", has revealed that Hollard Insurance currently has one of the lowest records in regards to the level of service it provides its clients in comparison to other African insurance firms. According to the survey, Hollard’s customers provided the fewest compliments while simultaneously registering the most consumer complaints. It can only be hoped that the head of the new business unit, former Etana Chairman, Paolo Cavalieri, will be successful in improving the Hollard Insurance level of service and reinvigorating Hollard’s reputation. Such an improvement will be vital if Hollard hopes to close the gap with Santam, South Africa’s largest short-term insurance company in terms of size, and to close the gap service wise with Auto and General and Momentum, the two firms who came in at the top of the Carinfo survey.
Technical details of transaction
Hollard Broker Markets will incorporate all nineteen existing Etana branches, and is expected to slash costs by reducing the costly overlap associated with each unit individually underwriting specialist lines such as marine, engineering, agri-business and liabilities.
The deal has been in the works since March 2013 and was originally expected to wrap up by May 2013. It is only now in January 2014 that FSB approval signals the end of this lengthy process. Full operational integration of the firms’ teams should be completed by the end of March 2014, at which time the Etana brand will be shelved. It is not clear whether the acquisition will result in any changes in the current number of support staff, although Hollard Insurance reports that the new unit will be evenly comprised of Hollard Insurance and Etana Insurance employees. Cavalieri optimistically said that “We have not yet had any staff leaving us as a result of this transaction,” which could be seen as implying that current clients will still maintain the relationships forged with existing account executives.
So, Hollard Insurance purchased Etana Insurance – Summary
This acquisition will probably not be the last and will probably result in additional consolidations of existing insurance companies. On the other hand, we still continue to see additional companies entering the insurance field, thus for example King Price who have only been around for about 18 months or so and yet seem to be taking a fair share of the ever growing market, especially seeing that there are still so many South-African's with no car insurance whatsoever. As to this specific merger, it will be interesting to see how a large insurance company such as Hollard Insurance deals with thousands of clients who are used to receiving a more personal touch from their insurance brokers.
Hollard Insurance has expressed explicit confidence in the chairman of Etana, Cavalieri, by designating him to head the combined unit, and Cavalieri returned the vote of confidence by committing to a minimum 24-month stay.
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