Insurance industry encouraging with new foreign acquisition deals

The nation’s insurance industry is about to witness a beehive of acquisition activities, as more foreign firms show interest in the local underwriting market which analysts say has huge potential for growth.

The latest of the deals is by Rosewood Insurance Group of Switzerland, a subsidiary of Greenoak Global of UK, which is in the process of concluding acquisition of a majority stake in Union Assurance Company Limited.

The company, BusinessDay investigations reveal, is gunning for a 93 percent equity stake in the Nigerian general business underwriting firm, wholly owned by Union Bank plc. The acquisition is waiting for the Securities and Exchange Commission’s (SEC) approval for conclusion.

Rosewood Insurance Group AG (“Rosewood”) is an insurance venture based in Zurich, Switzerland, wholly-owned by Greenoaks Global Holdings Ltd (“Greenoaks”).

Rosewood leverages deep insurance expertise and a long-term partnership approach to help build

Greenoaks’ insurance companies into local market leaders, while Greenoaks partners with and builds local insurers in attractive global economies, focusing on identifying high quality insurance operations with competitive advantages that can develop into industry leaders.

The plan by Union Bank to quit ownership of the insurance company came following the reversal of universal banking licences by the Central Bank of Nigeria (CBN), directing banks to relinquish ownership of non-banking activities, except on hold-co basis.

Industry watchers who spoke to BusinessDay last night, said there were  a good number of other acquisition deals going on in the market, which were expected to be concluded before the end of the year.

According to our source, most of the acquisitions are in bank-owned subsidiaries, whose owner banks were responding to the apex bank’s directive to quit universal banking operations.

In recent times also, other foreign players including Old Mutual, Sanlam and NSIA, all of South Africa,  among others, have come into the Nigerian market through acquisitions and partnerships which are expected to stir competition and stimulate further market growth.

Godwin Odah, managing director, Union Assurance Company Limited, had told a group of insurance brokers in Lagos, that following the CBN’s directive banning universal banking “I am pleased to inform our distinguished brokers that Union Bank is in the final stage of complying with this CBN requirement by divesting its 93 percent shareholding in Union Assurance.

Odah added,  “As soon as the formal regulatory approvals are secured, we shall be glad to unveil the new owners of the company to our stakeholders, including the broking community”.

He said the years 2014 and 2015 promised to produce interesting and exciting performance for the company as it transits through these phases.

A recent report by US-based research firm, Fast Market Research, says Nigeria’s insurance industry would grow at an average annual rate of 7.5 per cent between this year and 2018.

The Boston-based research firm is a leading provider of market research, business information and competitive intelligence, representing top global analysts and publishers.

“The industry is projected to grow at a cumulative average growth rate (CAGR) of 7.5 per cent over the forecast period. The strength in the country’s economy, combined with the introduction of new laws by the Nigerian insurance regulator, is expected to contribute to the overall growth of the Nigerian insurance industry over the forecast period,” the organisation forecasts.

Entitled, ‘The Insurance Industry in Nigeria: Key Trends and Opportunities to 2018,’ the report revealed that the CAGR for the insurance industry had peaked at 10 per cent, due to a sterling performance by the life insurance segment.

“In terms of written premium value, the Nigerian insurance industry grew at a review period CAGR of 10 per cent. This was due to the strong performance of the life segment, which registered a CAGR of 22.20 per cent during the review period,” the report further read.

The growth in the industry was also linked to the rise in disposable income, a factor that has been endorsed by leading consultants as a veritable driver of non-food expenditure.

Decrease in inflation rates and a marginal increase in the Nigerian labour force were also cited as factors promoting growth of the sector.

There still remains some untapped potential for the sector, as only about one per cent of the total Nigerian adult population is insured, according to the National Insurance Commission (NAICOM).

Also, most motorists have been reported as being unlicensed and uninsured. Capturing this extra potential may be the next big step for the sustenance and long term growth of the sector, the report said.

Businessday