Sparks fly over ‘imbecile’ life insurer deal

A failed attempt by curator Fagmeedah Petersen-Cook to sell troubled life insurance company 3Sixty Life — which was placed under curatorship more than two years ago — for just R1 has led to a war of words between her and parent company Doves Group Holdings (DGH).

This latest twist in the 3Sixty saga is revealed in a string of letters between DGH, the curator and prospective buyer Rand Mutual Assurance (RMA), which the Sunday Times has seen.

3Sixty is an underwriter of life insurance and funeral policies that are sold and marketed by Numsa Financial Services (NFS) to members of the union. Numsa, the National Union of Metalworkers of South Africa, is the country’s largest union with more than 300,000 members.

DGH is one of the largest funeral directing companies in South Africa, and runs a national network of 160 branches providing insurance, funeral services and related products.

3Sixty was placed under provisional curatorship in December 2021 after an urgent application by the Prudential Authority, which accused the insurer of failing to maintain minimum capital requirements and solvency capital requirements. 

The letters show that 3Sixty, which in 2022 and 2023 made profits of R60m and R40m, is now in dire straits.

Wouldn’t it be nice Mandla, that you make a hostile takeover of our insurance company through the curator for R1, leverage our markets and distribution channels, and then sell 30% back to us at a hefty amount?

—  Doves executive chair Khandani Msibi

Petersen-Cook says in the correspondence that the company is trading with negative equity, while Doves executive chair Khandani Msibi says he believes it  should be wound up.

A decision by Doves and NFS, which is also under the DGH umbrella, to enter an underwriting agreement with African Unity Life in June led to 3Sixty Life losing up to 80% of its policyholders, pushing the company further into its death spiral. Petersen-Cook failed in a court bid to stop the transaction, in which more than 1.3-million policies were transferred to African Unity.

The African Unity transaction, Msibi said in a letter to RMA CEO Mandla Shezi on October 1, was precipitated by Petersen-Cook, who he said had tried  to throttle the group by reneging on commissions due to it and its subsidiaries.

“We sadly had to pull the plug and once we signed with African Unity, we are not prepared to look back at all,” he said in the letter. “This is a solid and sound decision we made for the survival of DGH and its group of companies.”

The strongly worded letter was copied to Petersen-Cook as well as the Prudential Authority regulator.

Msibi accused the curator and RMA of conniving to shield Petersen-Cook from “the mess she intentionally created”.

“3Sixty Life is dying without the channels and she alienated the channels herself with her hostility,” he said.

He also accused Petersen-Cook of diverting some R48m from the company’s reserves to profit in an effort to mask its financial predicament.

“Wouldn’t it be nice Mandla,” Msibi says in the letter to Shezi, “that you make a hostile takeover of our insurance company through the curator for R1, leverage our markets and distribution channels, and then sell 30% back to us at a hefty amount?”

Msibi called the attempt to sell 3Sixty to RMA “a transaction for imbeciles”, saying 3Sixty Life did not have any liabilities as an insurance company, owned assets valued at more than R450m and had, during the past 30 months under curatorship, met claims and overhead obligations.

In her own correspondence to Doves, Petersen-Cook had said it was impossible for RMA to make an offer above R1 for 3Sixty Life because the business would have a negative equity valuation once loans due to group companies were deemed settled.

She told the Sunday Times the company was placed under curatorship by the high court for, among other reasons, failing to meet the capital requirements as contained in the Insurance Act of 2017, and failing to recapitalise the business to the required solvency levels.

“The curator has explored many options to recapitalise the business to the required level of solvency. These options are confidential in nature. The curator can thus not provide any comment. Our main aim is to ensure that policyholders are adequately protected in any transaction,” she said.

“In relation to the valuation of an insurance company, it must be kept in mind that the assets of an insurance company do not automatically translate to the valuation of the business.

“While it can be stated that the company has assets of a certain amount, it has corresponding insurance liabilities to a similar amount. It does not have the minimum capital buffer as required of insurance companies.”

Petersen-Cook added that a portion of 3Sixty Life’s assets represented loans to group companies, and the recoverability of the loans had not been tested.

This week Msibi said: “For a long time the curator has refused to give us actuarial reports. In an effort to convince us about this [RMA] deal she sent a report that indicates that 3Sixty life has exceeded the minimum capital requirements and that the insurance liabilities are fully covered by the assets,” Msibi said.

“Besides, if 3Sixty has negative equity it should be shut down as a matter of urgency as it is trading recklessly, but 3Sixty Life has been bled for three years by the Prudential Authority and curator to create a scenario [of a failing company] they claim exists. Why not shut it down?”

RMA is an administrator of occupational injury and disease compensation in the mining and metal industries with licences to operate under both short and long term insurance. RMA group executive for social insurance and marketing, Thulani Sibeko, told the Sunday Times the company does not comment on possible partnership discussions.

“RMA is continuously looking for better ways to deliver better protection, experiences and value for our beneficiaries. In pursuit of these aspirations, we leverage our own capabilities and explore opportunities to partner with various third parties,” he said.

At the time 3Sixty was placed under provisional curatorship, it said it was struggling under the weight of increased claims driven by Covid but had put together a recapitalisation plan. However a report commissioned by the Prudential Authority in 2020 found millions of rand in unauthorised intercompany loans and suspicious expenses.

The Reserve Bank, under which the Prudential Authority falls, confirmed it had been made aware of an offer for the acquisition of 3Sixty Life.

“The court-appointed curator of 3Sixty Life is tasked with a host of executive powers, including the day-to-day management of the insurer, as well as considering any offers to recapitalisation the business. Any offer to recapitalise the business has to be presented by the curator to the shareholder,” it said.

“The Prudential Authority is working with the curator to ensure 3Sixty Life’s policyholders continue to be properly protected during this process.”