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The East African : April 21st 2014
The EastAfrican 36 GROWTH STRATEGY Insurance sector hit by wave of mergers, takeovers The fi≥ms want to g≥ow thei≥ ma≥ket sha≥e and b≥oaden ≥evenue sou≥ces By STEVE MBOGO Special Correspondent 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, P 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 PanAfrican 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- $16.5m an-African reinsurer Continental Re is seeking new BUSINESS APRIL 19-25,2014 Dubai-based powe≥ p≥ovide≥ opens Nai≥obi o∞ce fo≥ EA A SPECIAL CORRESPONDENT The EastAfrican DUBAI-BASED Altaaqa Global CAT Rental Power, a temporary power solutions provider, has opened a branch in Nairobi to serve the East African region. The office will serve Tanzania, Rwanda, Burundi, Uganda, Kenya, Somalia, Ethiopia, Sudan, South Sudan, Djibouti and Eritrea. “Business in East Africa is flourishing and the economy is thriving, resulting in increased demand for power. Our new branch will enable us to reach this region faster. With the combined fleet of our company in Saudi Arabia, Altaaqa Global has 1,400GW of rental power readily available,” said Peter den Boogert, general manager of Altaaqa Global. “This strategic expansion is in line MARKET CONTROL Statistics show that foreign reinsurance companies dominate market share, controlling more than a half of Africa’s life and non-life reinsurance market. Foreign reinsurers control 58.8 per cent of non-life insurance market and 55 per cent of life market in Africa. 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, The amount Britam paid to acquire a 99 per cent stake of Real Insurance in December 2013 in a cash-andshare swap deal 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 Africa-owned reinsurers control 26.7 per cent of non-life market and only two per cent of the life market. Africa-based but foreign owned reinsurers control 14.7 per cent on non-life market and 42.6 per cent of life market. 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 nonbanking 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. The company provides temporary power solutions to power plants running on various fuel. Picture: File with our vision to be the leading and the most preferred temporary power solutions provider before 2020. We now have the capability to provide power plants running on various fuel such as piped natural gas; liquefied petroleum gas; compressed natural gas; liquefied natural gas; flare gas; diesel; dual-fuel (70 per cent gas and 30 per cent diesel); and, very soon, heavy fuel oil,” said Steven Meyrick, a board representative of Altaaqa Global. “East Africa has a promising economic outlook within the energy and engineering sectors,” added Majid Zahid, strategic accounts director of Altaaqa Global. Growth factors Market analysts attribute the notable growth of the region to several factors like large-scale infrastructure development, economic reforms and new discovery of energy and natural resources. Kenya, among other African countries, is expected to become a vital regional financial and business hub, with consistent five to seven per cent economic growth year-onyear. Tanzania, Somalia, Uganda and South Sudan are predicted to grow economically following their discovery of oil and gas. Ethiopia and Rwanda are projected to show remarkable development, owing to an expansion in agricultural activities and a strong reform record, respectively.
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