Resolution Insurance CEO Peter Nduati at a past function. His stake in the regional insurer has dropped from 52 per cent in 2010 mainly due to the ADC’s share dealings. Photo/FILE
What you need to know:
African Development Corporation (ADC) says it will invest a further $3 million (Sh258 million) in Resolution, which is equivalent to a 23.4 per cent stake based on the company’s December valuation of about Sh1.1 billion.
ADC is bullish about Resolution’s future prospects, citing its recent conversion from a medical insurance provider into a general insurer in Kenya.
A German private equity firm is set to acquire an additional stake in Resolution Insurance as it races to gain majority control of the regional insurer.
African Development Corporation (ADC) says it will invest a further $3 million (Sh258 million) in Resolution, which is equivalent to a 23.4 per cent stake based on the company’s December valuation of about Sh1.1 billion.
The PE currently owns 38.74 per cent of Resolution Insurance and the injection may dilute the stakes of the insurer’s founders –including CEO Peter Nduati —if they cede their ownership or the firm creates new shares to accommodate ADC.
“The supervisory board unanimously approved a further investment in Resolution Health of up to $3 million,” ADC said in a disclosure note in its 2012 annual report.
Last year, ADC raised Sh4.6 billion to fund fresh acquisitions in the continent, with additional shareholding in Resolution identified as part of the new deals in the pipeline.
The Frankfurt-based PE firm made its first investment in Resolution in December 2010 following the purchase of a 25.1 per cent stake for €2.5 million (Sh287.8 million).
ADC acquired a further 13.64 per cent stake in the insurer in October last year when it converted its debentures (unsecured loans) into equity—pushing its ownership of Resolution to 38.74 per cent. Mr Nduati told the Business Daily earlier this year of plans to reduce his stake to below his current ownership of 20 per cent.
His stake has dropped from 52 per cent in 2010 mainly due to the ADC’s share dealings, bringing him in compliance with the law that bars chief executives from owning more than a quarter of insurance firms they are managing.
Other Resolution Health top shareholders are Heartwood and former Equity Bank executive John Mwangi.
ADC is bullish about Resolution’s future prospects, citing its recent conversion from a medical insurance provider into a general insurer in Kenya.
The company also ventured into Tanzania last year and is planning to expand into more countries in the region in the short term.
Resolution made a net profit of Sh48.7 million last year, reversing a net loss of Sh128.7 million in 2011. This came as revenues rose 31.2 per cent to Sh2 billion from Sh1.5 billion over the same period.
The company mainly targets middle class individuals and small and medium-sized firms with medical insurance plans, citing the relatively higher profit margins from such clients compared to large firms.
It has introduced work injury benefits, personal accident, and group life covers in Kenya and the Tanzania market following its conversion into a general insurer.
ADC is the latest foreign investor to seek control of a local insurer, with the international investors seeking to capture a larger market share in the regional market from a base in Nairobi.
Last year, Morocco-based Saham Finances acquired a 66.6 per cent stake in Mercantile Insurance from the family of the late Lalit Pandit in a multi-million-shilling deal.
South Africa’s Sanlam Limited is also in the process of raising its stake in Pan Africa Insurance to 60 per cent from the previous 50 per cent.
