Jubilee Holdings scouts for acquisition targets in Africa

Jubilee chairman Nizar Juma (left) with the insurer’s CEO Patrick Tumbo when they announced the firm’s results June 10, 2014. FILE PHOTO|NATION
Jubilee chairman Nizar Juma (left) with the insurer’s CEO Patrick Tumbo when they announced the firm’s results June 10, 2014. FILE PHOTO|NATION 

Jubilee Holdings is spending more than Sh3 billion on property developments in Uganda and Tanzania and looking to grow its insurance business across the continent by acquisitions or setting up of new operations.

The company currently has insurance and investment subsidiaries in Kenya, Uganda, Tanzania, Burundi and Mauritius, with the firm ranked the largest insurer in the majority of these markets.

Jubilee collected Sh5.5 billion in total gross premiums in the first quarter, cementing its position as Kenya’s largest insurance firm according to statistics from the Insurance Regulatory Authority (IRA).

The Business Daily spoke with Nizar Juma, the chairman of Jubilee Holdings, on the company’s growth plans and emerging issues in the local insurance market.

Could you share with us Jubilee’s growth plans?

We are looking for acquisitions locally and in the regional market. We are looking for companies that have a DNA like that of Jubilee. We are fastidious in terms of ethics in business, including tax compliance.

There are some negotiations currently ongoing with target companies and we will announce the details later when everything is finalised. There are instances where we will go greenfield, but acquisitions remain our preferred expansion mode.

Which specific markets are you looking at?

We are not limited; we want to grow both in our current operations and new markets as well. Our ambition is to be the most important financial services group on the continent.

West Africa offers good opportunities for us and we will likely use the greenfield option there. We are already doing some business in these countries through the Aga Khan Development Network.

We had plans to also start operations in South Sudan but we have shelved it due to the situation there. We remain focused on expansion and we recently brought in a CEO for the Jubilee Group whose main role is to spearhead the company’s growth strategy.

In markets where Jubilee has existing operations, are the acquisitions aimed at entering insurance segments where the company does not yet have a presence?

We are major players in all insurance classes and lead in the major ones like medical insurance. Our goal is to grow market share. In searching for acquisitions, we are not precluding companies that underwrite business similar to that of Jubilee.

How will Jubilee fund the acquisitions and new startups?

Mainly through undistributed profits (retained earnings). Our shareholders are also ready to provide more money should we come across a large acquisition that we cannot fully fund from our internally generated cash. We have never asked shareholders to put in new money since 1985 but it’s an option that we have.

What is Jubilee’s investment strategy?

We look for opportunities that give us strong and reliable returns. This is especially important for our long-term (life) business. We have invested in infrastructure projects such as Seacom (a fibre optic firm) and Bujagali (a Uganda-based power company). In Bujagali, for instance, we have a satisfactory and guaranteed internal rate of return for the long term.

These are the kinds of investments that we find attractive. We are also investing in the real estate sector through our associate PDM Holdings Ltd.

Does Jubilee plan to undertake any new property developments in the near term?

We have two upcoming projects in Uganda and Tanzania. We are contributing equity in the projects that will be built by PDM.

What type of property developments will these be and what is the capital expenditure?

They are residential and commercial properties and we have already purchased the land. The Uganda project will cost Sh1.8 billion and the one in Tanzania will cost Sh1.5 billion.

What new issues are emerging in the local insurance business?

One of the key issues is the separation of life insurance from general insurance. This is not yet an obligation in Kenya but we will do it. This is the direction in the global insurance business and it is welcome.

The main idea is to avoid problems in one business from spreading to another like was the case during the 2008 global financial crisis. It is particularly important for safeguarding the interests of customers holding life insurance policies that are long term in nature.

What exactly does this split entail?

It means that you have an independent executive team, offices, branches and support services for each of the two types of insurance business.

What are the cost implications of such a structure?

It will obviously cost more to effect this separation, driven largely by hiring of more staff. But the biggest problem is filling the new vacancies that will be created at the higher level. It’s hard to find top executive talent in this region.

We are in talks with the regulators so that the split is not carried out is such a way that it will deny businesses economies of scale and synergies. Our view is that the two lines of businesses should be able to run on the same branch network and share services such as marketing and branding.

Is Jubilee effecting this separation in all its markets?

Yes, we intend to do this across our business in the short term. We have already done it in Uganda, Tanzania, and Mauritius. Kenya and Burundi are the remaining markets.