Analysts say it is unlikely that MMI Holdings will target an NSE-listed insurance company. FILE
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Chief executive Mervyn Cookson says firm has already entered into negotiations to buy a Kenyan insurance company.
Analysts said that it is unlikely that the firm will be targeting an NSE-listed insurance company due to their shareholding structures and lengthy regulatory approval requirements.
Buying a listed company would need approval of the Capital Markets Authority, shareholders, and the Insurance Regulatory Authority.
MMI Holdings, a publicly listed South African Insurance company that owns Metropolitan Kenya, has announced intention to acquire another local insurer as part of its Africa expansion.
The Metropolitan International chief executive Mervyn Cookson said in an interview the company has already entered into negotiations to buy a Kenyan insurance company and is eyeing more potential acquisitions.
“We are in discussions with one company in Kenya at the moment to conclude a transaction and have shortlisted a few more similar companies for further investigation,” Mr Cookson told the Business Daily.
MMI did not however say how much funds it has set aside for possible Kenyan buyouts but its total Africa expansion war chest is Sh4.46 billion.
“We earmarked capital of R500 million (Sh4.46 billion) for the expansion strategy of Metropolitan International in Africa over the next five years,” says the firm’s 2012 annual report.
Analysts said that it is unlikely that MMI will be targeting a Nairobi Security Exhange- listed insurance company due to their shareholding structures and lengthy regulatory approval requirements.
“It is probably a private company since buying a listed company is a more tedious process,” said Brenda Kithinji, a research analyst at Standard Investment Bank.
Buying a listed company would need approval of the Capital Markets Authority, shareholders, and the Insurance Regulatory Authority.
The shareholder structure of most NSE-listed companies has anchor shareholders who make it difficult to get consent for a buyout.
CIC Insurance is majority owned by Co-operative Insurance Societies which has a 74.3 per cent stake. Shareholders agreed on a five-year lock-in period when it listed in June 2012.
The Treasury has a 63.35 per cent stake in Kenya Re, which would therefore require approval from the Privatisation Commission, in addition to other regulators, if MMI were to buy out the company.
Pan Africa Insurance is majority owned by South Africa’s Sanlam with a 72.5 per cent stake, Liberty Holdings has a 56.82 per cent stake in Liberty Kenya Holdings while British American Holdings is the anchor shareholder in Britam with a 23.92 per cent stake.
Kenya has 23 life and 38 non-life licensed insurers operating in the industry as at June 30 2013. IRA’s Insurance Industry Report for between January and June 2013 shows that the overall gross premiums increased by 15 per cent to Sh63 billion from Sh55 billion made in a similar half in 2012.
Despite growth the industry has been battling undercutting and fraud, which have eaten into their earnings.
“Penetration level is very low and that is where the opportunity is,” said Johnson Nderi, head of research at Suntra Investment Bank.
Majority stake
An insurance report by Standard Investment Bank shows that the insurance penetration rate in Kenya stood at 3.03 per cent at the end of 2011, while South Africa’s coverage was 11.06 per cent.
Mr Nderi said that the chance to close this gap will see more firms entering the Kenyan market.
MMI, which is listed on the Johannesburg and Namibia stock exchanges, joins Dimension Data and Massmart as South African companies that have either acquired Kenyan firms or are in discussions to buy strategic stakes.
