Jubilee Insurance seeks to acquire rival firms for market share growth

What you need to know:

The company is targeting firms that are ready to sell their majority stakes, with insurer betting on the acquisitions to grow its earnings in the coming years.
The buyouts will be in markets that Jubilee has operations like Kenya, Uganda, Tanzania, Burundi and Mauritius.
The drive by Jubilee to acquire rival firms is expected to step up deal making in the region’s insurance market.

Jubilee Insurance is seeking buyout deals in Kenya and in the region to grow market share in the crowded and increasingly competitive east African market.

The company is targeting firms that are ready to sell their majority stakes, with insurer betting on the acquisitions to grow its earnings in the coming years.

The buyouts will be in markets that Jubilee has operations like Kenya, Uganda, Tanzania, Burundi and Mauritius.

“Jubilee will also consider acquisitions in its core markets if these can be executed effectively to add market share efficiently and increase the value of the Jubilee franchise,” said the insurer in a statement Thursday after its AGM.

Jubilee Insurance market share in 2011 was 10.98 per cent up from nine per cent in 2010, according to data from the Association of Kenya Insurers (AKI).

The insurer posted a net profit of Sh2.6 billion compared to Sh1.9 billion in 2011. Its gross premiums rose to Sh15.3 billion from Sh12 billion in the same period. Kenya has 43 licensed insurance companies that compete for a limited market characterised by low penetration.

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The uptake of insurance cover, both at corporate and personal level, remains predominantly in the motor, fire industry and personal accident (mainly group medical cover) classes.

This has analysts and policy makers push for consolidation.

“In an insurance sector that remains fragmented, the case for continued consolidation is strong,” says PricewaterhouseCoopers (PwC).

“While funding is likely to be challenging for some time to come, investment in M&A could help companies develop complementary earnings streams, realise opportunities for cost-saving synergies and strengthen their presence in the regional markets.”

The drive by Jubilee to acquire rival firms is expected to step up deal making in the region’s insurance market.

This started with acquisition of CFC holdings--which owned CFC and Heritage Insurance--by South Africa’s Standard Bank in 2008 after a lull in deal making.

The Standard Bank deal followed the merger Apollo Insurance and Pan Africa Insurance general business to form APA Insurance in 2003.