Insurance Emerges Toast of Foreign Investors in 2014

More foreign investors are buying into the nation’s insurance sector, to bring their experience and expertise to drive insurance penetration in the country currently put at less than one per cent.

For instance, at the end of November this year, France’s AXA announced that it had acquired 77 per cent interest in Mansard Insurance, formerly GTAssurance, for €198 million.

AXA is not the first foreign entrant into the Nigerian market. It joined Old Mutual with the acquisition of (Oceanic Insurance), Sanlam of South Africa bought into (FBN Life Assurance), NSIA participation in (ADIC Insurance) and Greenoaks Global Holdings also bought into (Union Assurance).

AXA has taken the well-trodden path to insurance companies in sub-Saharan Africa, following Swiss Re investments in Kenya (Apollo Investments) and Prudential in Ghana (Express Life).

Analysts believe that the major driver behind the deals in Nigeria has been the decision by the Central Bank of Nigeria (CBN) to review Universal Banking licenses, which forced banks to divest insurance subsidiaries from their portfolios unless they opt for the holding company structure.

This led both GT Bank and Union Bank of Nigeria (UBN) to sell off their insurance subsidiaries.

Besides, the main driver, however, has been the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class.

The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, and consumer goods manufacturing and advertising.

South Africa’s Sanlam views Nigeria as one of its star markets in Africa, noting that the operation achieved breakeven after little more than two years. It cited figures showing that insurance penetration stands at about 10 per cent in South Africa yet less than two per cent in Nigeria. 

It might have added that the authorities are supportive, and we give the example of the requirement for all companies with at least five employees to provide life cover.

Also the regulation allows foreign companies to own insurance firms in full, and we can see their becoming the dominant players in the industry within this decade. This is obviously not the case with banking.

The industry regulator, the National Insurance Commission (NAICOM), reported a total of N258 billion in gross premium income for 2013 and expects N1trillion by year 2018. The CME has projected N5 trillion within 10 years.

NAICOM data for 2013 show that the unlisted Leadway Assurance achieved the largest gross premium income (N41.8cbillion). The next four are all quoted on the NSE: AIICO (N22.8 billion), Custodian and Allied (N20.5 billion), Continental Reinsurance (N13.8 billion) and Mansard (N13.6 billion).