Insurance sector hit by wave of mergers, takeovers
Insurance firms want to grow their market share and broaden revenue sources. TEA Graphic
What you need to know:
A number of insurance firms and financial services firms have been on an acquisition spree to consolidate their market share and broaden revenue sources.
Regional reinsurers are also considering forming a reinsurance pool to enable them to pool their resources to undertake huge and sophisticated risks like those in oil and gas, engineering and terrorism.
Statistics show that foreign reinsurance companies dominate the market, controlling more than a half of Africa’s life and non-life reinsurance market.
Pan-African reinsurer Continental Re is seeking new deals in East Africa in a new wave of mergers, acquisitions and share deals that promises to shake up the bloc’s insurance and reinsurance market.
The firm’s managing director, Olufemi Oyetunji, said the reinsurer has lined up several deals as part of its acquisition strategy to increase its market share in Africa, in addition to expanding its regional subsidiaries.
A number of insurance firms and financial services firms, led by Britam, the Nairobi Securities Exchange-listed financial services group, have been on an acquisition spree to consolidate their market share and broaden revenue sources.
Britam acquired 99 per cent of Real Insurance in December last year in a cash-and-share swap deal valued at Ksh1.4 billion ($16.4 million).
Last week, Reuters quoted South Africa insurer Sanlam as saying it would increase its stake in the NSE-listed Pan African Insurance Company.
The announcement came only a week after Sanlam said it had closed a deal to acquire a 50.3 per cent in Niko Uganda as part of a deal that saw it acquire a 49 per cent stake in Niko Group’s insurance business in Uganda, Malawi, Tanzania and Zambia.
Last week Saham, the Morocco investment company, said it had received the necessary regulatory approvals from authorities in Kigali to buy 66.7 per cent of Rwandan insurance firm Corar SA for an undisclosed amount. Kenya’s Jubilee Insurance also said it is scouting for potential acquisition targets.
Continental Re said the intention of the planned deals is to strengthen the company as part of ongoing efforts in Africa to increase the capacity of insurance and reinsurance companies to ward off dominant reinsurance companies, in particular those that control over half the business in Africa.
“It is important to strengthen local reinsurance companies. Africa must have strong and large insurance and reinsurance institutions so that we can keep African premiums in the continent,” said Mr Oyetunji.
“We have entered into discussions with reinsurance companies in West Africa, East Africa and in Southern Africa. Additional offices will be opened in Tunisia in April and Botswana in May this year,” said Mr Oyetunji.
Regional deals
In another deal, regional reinsurer ZEP-RE, which is focused on the Comesa region, has received a cash injection of $15 million from German development bank DEG for an 11 per cent stake.
DEG is the second international development finance institution to join ZEP-RE, after the African Development Bank, which joined the company in 2011 and currently holds a 13 per cent stake in the company.
ZEP-RE, also known as the PTA Reinsurance Company is charged with the task of promoting trade, development and integration within the Comesa region through the insurance and reinsurance business.
In other recent deals, CIC Insurance Group signed a $3.5 million agreement with Malawi Union of Savings and Credit Co-operatives (MUSCCO) Ltd to begin operations in the Southern African country.
The insurer is targeting Malawi’s co-operative movement that comprises 45 savings and credit unions with a combined membership of 110,000 people.
CIC’s entry into Malawi’s market is part of its wider regional expansion strategy, which includes South Sudan and Uganda at a cost of $14.1 million.
Mercantile Insurance has been acquired by Morocco-based Saham Group and rebranded as Saham Assurance. Saham has operations in North Africa, sub-Saharan Africa and the Middle East.
Saham group director general Giancula Marcopoli said that the acquisition of the insurance company is part of their growth strategy to increase their footprint on the continent and consolidate market share in the insurance industry.
Metropolitan International, a division of the JSE-listed life insurer MMI Holdings, bought an undisclosed shareholding in the Kenyan insurer Cannon Assurance for $27.3 million. MMI has operations in 12 African countries outside South Africa including in Kenya through Metropolitan Life Kenya.
Another deal is expected when Frankfurt-based African Development Corporation (ADC) succeeds in disposing of its 38.74 per cent stake in Resolution Insurance in a deal estimated at more than $4.7 million, as per its latest annual report.
This is part of its plan to exit all its non-banking ventures in Africa to focus exclusively on the banking industry.
Regional reinsurers are also considering forming a reinsurance pool to enable them to pool their resources to undertake huge and sophisticated risks like those in oil and gas, engineering and terrorism.
Isaac Nga’ru, an insurance industry analyst, said the key driver of activity in the reinsurance sector is to consolidate in order to improve the local capacity to underwrite bigger risks.
Statistics show that foreign reinsurance companies dominate the market, controlling more than a half of Africa’s life and non-life reinsurance market.
