German firm buys 25 p.c stake in Resolution Health
Resolution Health CEO Peter Nduati (centre) signs a contract with the ADC’s corporate development director Dirk Harbecke (left). Looking on is ADC insurance CEO, Andrew Lee. Photo/FREDRICK ONYANGO
Resolution Health East Africa has sold a 25.1 per cent stake to a German investor for Sh184 million, funds the firm said will be used to expand to Rwanda, Uganda, and Burundi.
The medical insurer raised the cash after selling new additional shares created to accommodate private equity firm African Development Corporation (ADC).
“The money will be used to strengthen our core capital as we expand to new markets,” said Mr Peter Nduati, the CEO.
The company with a core capital of Sh40 million, is expected to boost its funds to Sh224 million after the new cash is reflected in the balance sheet.
ADC will take up three out of the seven seats at Resolution Health’s boardroom.
The deal comes at a time when foreign equity funds have stepped up their investments in Kenya in the past one year.
Interest in Kenya
British CDC, FMO of Netherlands, Africinvest, Leapfrog, Soros Funds Management, Flagstone Reinsurance, KfW of Germany, and France’s Proparco are some of the foreign private equity and sovereign funds that have invested in Kenya.
The equity funds are looking to spend over Sh3 billion in the country this year.
The investors see Kenya’s economy growing fast, gaining from its transport and financial services hub status in the East African market.
The economy is expected to record a growth rate of at least five per cent in 2010 compared to 2.6 per cent a year earlier, pushed by a strong performance of the mainstay agriculture, tourism, and financial services sectors.
ADC’s deal with Resolution Health is its first in the Kenyan market and firm is looking to close more deals in the near term.
“We are looking for more opportunities in the banking and insurance sector,” said Dirk Harbecke, the chief executive of the Frankfurt-based ADC.
“We are excited about the Kenyan market because it has diverse economic sectors that are growing fast. Kenya is also well placed in the East African Community and this fits in well with our experience in the European Union,” he said.
ADC recently set up an insurance arm to make investments in Sub-Saharan Africa’s insurance market where penetration is low.
Boost to insurer
The merger is a boost to Resolution Health which is facing stiff competition as insurers race to launch new products, seek mergers and expand to East African region.
Resolution Health offers individual and corporate group medical insurance in Kenya and Tanzania.
The insurer made a profit of Sh197.9 million in 2009 compared to earnings of Sh171.1 million a year earlier in a sector that recorded over Sh6 billion in premiums last year.
AAR Holdings Group, CIC Insurance, Old Mutual, Real Insurance, and BlueShield Insurance Company are among the insurers that have moved to raise funds for growth, raising stakes in the insurance market.
“Insurers need more funds to be able to meet their liabilities (including paying claims) as they expand their customer base, branch network, and issue new products,” said Tom Gichuhi, the chief executive of the Association of Kenya Insurers (AKI).
Insurance uptake in Kenya stands at a measly 2.5 per cent and firms are seeking additional capital to support expansions.
In November last year, healthcare provider AAR Holdings sold a 20 per cent stake to Netherlands-based private equity fund Investment Fund for Health in Africa, raising Sh750 million that was set aside for restructuring of its business ahead of listing at the Nairobi Stock Exchange in five years.
CIC Insurance has doubled its capital base to Sh1.2 billion after raising Sh600 million from shareholders.
Old Mutual, 66 per cent-owned by Old Mutual Plc, is seeking to raise Sh700 million through a rights issue in a bid to improve its technology platform and expand into the East African region.
Real Insurance wants to raise Sh651 million through a private share sale, to be used for construction of a new rental office complex in Upper Hill, Nairobi.
