Kenya Re acquires stakes in Ugandan state-owned underwriter and ATI
What you need to know:
Kenya Re acquired five per cent of the two-year-old Uganda Reinsurance Company at Ksh20 million ($203,580).
Uganda insurance market is set to benefit from its nascent oil and gas sector making it attractive to investors.
The reinsurer also bought 10 shares in ATI at a cost of Ksh88 million (about $895,745) making it the third-largest private investor in the company.
Kenya Reinsurance has acquired stakes in Uganda Re and Africa Trade Insurance (ATI) as it seeks to diversify its revenue streams.
The company acquired five per cent of the two-year-old Uganda Reinsurance Company at Ksh20 million (about $203,580). Uganda Re benefits from a 15 per cent mandatory cession of all reinsurance business in Uganda.
“By them getting 15 per cent it means every reinsurer will lose market share and we saw the only way to keep our market share is to invest in Uganda Re,” said Kenya Re managing director Jadiah Mwarania.
Kenya Re had sought to buy 20 per cent of the reinsurer but was only able to secure five per cent shareholding, which the management attributed to competition to own a stake in the company.
Uganda insurance market is set to benefit from its nascent oil and gas sector making it attractive to investors. Other shareholders of the company include Uganda insurers with a 44 per cent stake and Ugandan individual private investors with three per cent.
Kenya Re has bought 10 shares in ATI at a cost of Ksh88 million (about $895,745) making it the third-largest private investor in the company.
“ATI takes political and credit risk insurance, a class of business that most reinsurers don’t want — so if profitable we will be getting a dividend from it,” said Mr Mwarania.
Kenya Re joins the government in the register of ATI shareholders. Kenya's National Treasury is the largest shareholder in the company with 283 shares worth Ksh2.6 billion (about $26.5 million) . The Treasury is also the majority shareholder of Kenya Re with a 60 per cent stake.
Other shareholders include the governments of Uganda, Tanzania, Burundi, Rwanda, Malawi and Zambia.
Kenya Re has been diversifying its income sources with regional expansion and acquisition of stakes in other companies.
It owns 16 per cent of regional reinsurer Zep Re. It is, however, likely to be diluted with the entry of World Bank’s investment arm International Finance Corporation.
Kenya Re has previously indicated its desire to raise its ownership in Zep Re back to 20 per cent even as it supports entry of new investors.
Zep Re has invited reputable investors in its fold as it seeks to boost its rating and attract new business, especially beyond the sub Sahara Africa.
Foreign markets account for 45 per cent of Kenya Re revenues. It recently disclosed plans to open an office in Lusaka, Zambia, which will serve the southern Africa market.
This will be Kenya Re’s second operation outside the country after opening operations in Abidjan, Ivory Coast, which serves the West African and Francophone markets.
Last year the company’s net profit rose by 12 per cent to Ksh3.1 billion ($31.6 million) while its net earned premiums rose by 20.2 per cent, pointing to a robust operating year both in Kenya and elsewhere in Africa where it does business.
