APA boss Ashok Shah buys stake in rival CIC Insurance

APA Insurance chief executive Ashok Shah has bought a stake in CIC Insurance in a rare transaction that gives the owner of the big underwriter a stake in one of his rivals.

CIC Insurance Group’s newly-released disclosures indicate that Mr Shah recently acquired 120,000 shares of the NSE-listed firm that were valued at Sh774,000 at the close of trading yesterday.

APA Insurance is a fully-owned general insurance subsidiary of Apollo Investments Limited, a privately-owned group with life insurance, asset management and property development arms.

Mr Shah, the Apollo Investment Group CEO, confirmed buying the CIC Insurance stock, a transaction that has seen his name pop up in the underwriter’s 10 largest owners’ list, under the foreign category.

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“I own shares in different companies in my personal capacity and I saw this (buying into CIC Insurance) as an interesting investment,” Mr Shah said.

Market share

The latest market share figures from the Insurance Regulatory Authority (IRA) rank APA as the industry’s sixth largest operator with 6.2 per cent of the market based on gross premiums while CIC is fourth with 7.1 per cent. Jubilee, Britam and ICEA Lion Group are the industry’s leaders with market shares of 12.6 per cent, 11.5 per cent and 7.9 per cent respectively while UAP-Old Mutual is fifth with 6.7 per cent of the market.

The battle for market share has recently produced a series of mergers and acquisitions and enhanced product development as insurers seek to attract and keep clients.

This activity is expected to continue for a while given that insurance penetration remains at a low of 1.55 per cent of Kenya’s newly re-based GDP.

Mr Shah’s share purchase is not only seen as an extraordinary vote of confidence in his rival’s business prospects but also a signal of his personal quest to maximise returns from the insurance industry as an ordinary investor and owner.

“This is a case of Mr Shah appreciating and expressing confidence in the value of a competitor company even though the transaction is personal,” said Isaac Ngaru, the managing partner of a local insurance consultancy Ngaru and Associates.

While some people might view Mr Shah’s move as akin to placing a bet on your horse and that of your prime opponent, Mr Ngaru said he saw nothing wrong in that. “He is simply spreading his personal investment risks by placing his money in a company where he stands to gain as an individual even as they actively compete at the corporate level,” he said.

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While Mr Shah is upbeat on CIC, which listed at the Nairobi Securities Exchange in 2012, the stock has so far not yielded the return he was hoping for. The stock, which closed trading yesterday at Sh6.45 a share, has in the past one year shed 30.85 per cent per cent of its value at the Nairobi bourse, a substantial dip that has seen the insurance guru delay increasing his stake.

“I was looking forward to much better returns but that has not happened since there has been a drop in the market. Hopefully, I will increase my shares if the market improves,” said Mr Shah.

Plummeting fortunes

The Business Daily was not able to ascertain when Mr Shah bought the shareholding in order to calculate the changes in his portfolio’s valuation.

Despite the plummeting of CIC’s fortunes at the Nairobi bourse, its top shareholders roll includes big names like Co-operative Bank managing director Gideon Muriuki and billionaire businessman Baloobhai Patel.

Mr Muriuki owns 123 million CIC shares (worth Sh793 million or 4.7 per cent) while Mr Patel owns six million shares, which were by close of trading yesterday valued at Sh38.7 million.

The firm’s top shareholder is Co-operative Bank, which owns 1.9 billion shares equivalent to 74.3 per cent of the regional underwriting company and are valued at Sh12.3 billion.

CIC’s net profit for the six months to June increased by 51.3 per cent to Sh209.4 million on the back of increased revenues.

The firm, which has operations in Uganda and South Sudan, saw its gross written premiums for the period grow by Sh1 billion to Sh6.93 billion while investment and other income increased by nearly one and a half times to Sh1.3 billion.