Britam and Jubilee lay the ground for bruising turf war

Financial services group Britam’s market share has jumped to within one percentage point below Kenya’s biggest insurer Jubilee, setting the two firms up for a bruising merger and acquisitions turf war.

Latest data from the Insurance Regulatory Authority (IRA) – the industry regulator -- indicates that Britam’s market share as measured by client numbers stood at nine per cent as of December, against Jubilee’s 11.8 per cent.

Britam’s recent buyout of rival Real Insurance (which has two per cent market share) however gives the firm a combined market share of 11 per cent, leaving it just 0.8 percentage points shy of leader Jubilee.

With Jubilee last week announcing plans to buy out a local rival insurance firm by the end of the year, the battle for market share between the two top firms seems to be heating up.

“We are still number one but let everybody else try to beat us,” said Nizar Juma, the chairman for Jubilee Holdings when releasing the company’s full-year results last week.

“Jubilee has an excellent team that is also looking forward to all the competition that they can give us. We are happy that we have retained our position as the overall number one insurer in East Africa.”

READ: Jubilee hires former AIG executive to drive expansion bid

IRA’s data shows that the gross written insurance premiums last year amounted to Sh131 billion, a 20.6 per cent increase from the previous year’s total of Sh108.6 billion

Jubilee’s total premiums were Sh15.4 billion while the combined premium of Britam and Real business was Sh14.3 billion, underscoring the closeness of the race between the two market leaders.

Jubilee is in five countries -- Kenya, Tanzania, Uganda, Burundi and Mauritius -- while Britam is in four; Kenya and South Sudan, Rwanda and Uganda.

Britam recently announced plans to buy 99 per cent shares of Real Insurance in a cash and share swap deal worth Sh1.4 billion expected to be completed next month.

Real has offices in Kenya, Tanzania, Malawi and Mozambique, which Britam will take over giving it presence in a total of seven countries.

“The merged entity now makes Britam the second largest insurance firm in Kenya,” said Britam chief executive Benson Wairegi in a recent interview.

Britam’s entry into Tanzania will mean that it will now be in two similar markets as Jubilee. This could however change soon given the fact that Jubilee is actively window shopping for businesses to buy out in Kenya and the region – with focus being in countries it is not in already.

When announcing that Jubilee full-year net profit had increased 10 per cent to Sh2.5 billion, Mr Juma announced that the company was in “acquisition talks with about three or four companies which we aim to buyout.”

“We are already done a lot of homework on this and we are hoping that in this financial year we will announce at least three deals that we are desperate for,” said Mr Juma, explaining that one firm is in Kenya, one in the region and others further away.

An acquisition provides an easy expansion path compared to a start-up, which could involve buying land, putting up buildings, hiring local staff, seeking regulatory approvals and struggling to fight for market share against established rivals.

The Association of Kenya Insurers says the purchase of Real by Britam is a “pacesetter” deal in the industry and that more of such transactions are in the offing.

Tom Gichuhi, the association’s chief executive, said top insures enjoy superior financial and shareholder backing than their counterparts in the lower ranks and hence they are on the lookout for buyout deals.

Jubilee’s market capitalisation currently stands at Sh18.5 billion while Britam’s is Sh34.1 billion, a difference of Sh15.6 billion.