Global insurer AON changes ownership in 10 African markets

Uganda, Kenya and Tanzania are some of the 10 African markets which global insurer AON is exiting through a change in its ownership structure.

But for Uganda, this development, coming just months after another American insurance giant AIG quit the country, raises eyebrows as to whether the Ugandan market has become the bogey for global brands.

AIG said it opted out as a result of change of its global strategy to exit from the weak markets.

US insurance broker AON is also leaving seven other sub-Saharan markets including Angola, Lesotho, Mozambique, Namibia, Swaziland and Zambia, after selling its stake to Capitalworks, an African-based private equity firm. The transaction is subject to regulatory approvals.

In a February 21, 2017 memo to associates in the industry – executives of insurance companies, reinsurance firms and the insurers’ lobby group – the AON Uganda chief executive officer Maurice Amogola said the move was “in line with our global growth strategy” to change “the ownership structure of some of our operations on the African continent”.

Mr Amogola added that AON will, however, maintain its relationship with its clients under the new ownership structure. As such, AON Benfield Africa, its reinsurance business, will continue to serve clients across the continent from its base in South Africa, either directly or through the correspondent agreement with Capitalworks.

“We also are focused on ensuring that our clients experience an uninterrupted level of service and security from AON and from the new group, which will be AON’s exclusive global network correspondent in these 10 countries and our largest exclusive correspondent on the African continent,” he said.

A correspondent agreement allows a firm to perform services for another where the latter does not have direct access.

AON has similar correspondent arrangement in other African markets such as Ghana, Nigeria and Zimbabwe.

Capitalworks

AON said it partnered with Capitalworks has a sound understanding of local market conditions, strong governance and a track record of successfully operating entities in the target countries.

The insurer said its employees in the 10 countries will now serve under the new entity lead by Joe Onsando, currently the chief executive of AON sub-Saharan Africa.

The new group will be launched once all the requisite regulatory approvals have been granted. In the meantime, the operations will continue to trade under the AON brand, before changing to a new name endorsed as an AON global network correspondent after the launch.

AON said the development reaffirms its positive outlook for business on the continent.

“The African continent presents great opportunities for growth and this transaction affirms a positive investment outlook for Africa driven by sound long-term fundamentals.

“The combination of global and in-country expertise will continue to help us to continue to lead the market in risk management on the continent,” Mr Onsando said in a statement.

But in November 2016, AIG offered a contrary view of its assessment of Uganda and other similar small African markets for insurance, which formed its basis for pulling out.

The firm said it would will not issue new policies for 2017 in Uganda “after careful consideration and an in-depth review” informed by its strategy to move out of weaker markets.

A 2016 report by audit firm Ernst and Young said insurance penetration in Uganda still stands at less than one per cent, representing just 0.6 per cent of the country’s GDP.