Liberty eyes buyout of Tanzania insurance company

NSE-listed insurer Liberty Kenya Holdings could buy out Dar es Salaam-based medical insurance firm Strategis as part of an ongoing restructuring of its Tanzanian business.

The insurer raised its stake in Strategis to 43 per cent last year from 39.18 per cent in 2012, investing about Sh10 million to buy the additional 3.86 per cent equity in a transaction that then valued the Tanzanian company at about Sh260 million.

Liberty says that it is in talks with its co-investors in the company that could see it take a majority stake or acquire all of Strategis’ shares.

“We are in talks with the other investors in Strategis, but what exactly will happen in terms in terms of changes in shareholding is not yet clear,” said Mike du Toit, Liberty’s CEO.

Strategis offers medical insurance covers in Tanzania, specialising in group or corporate plans.

The looming changes in Strategis’s ownership is part of the Nairobi Securities Exchange-listed Liberty’s review of its insurance operations in Tanzania where it sold all of its 45 per cent stake in general insurer Alliance in December 2012.

The company raised Sh440.5 million from the transaction, booking a net gain of Sh193.1 million.

“We are currently reviewing our shareholding arrangements in the remaining associate, Strategis Insurance Tanzania Limited. This process is expected to be finalized in the course of quarter 2 of 2014,” Liberty said in its latest annual report.

The company operates in Tanzania through its subsidiary Heritage Insurance Company Tanzania Limited which is one of the largest general insurers in that market.

Liberty says it will roll out bancassurance –the sale of insurance products through banks— to grow its client base in remote parts of Tanzania.

The company says its margins in that market have come under pressure owing to higher reinsurance premiums that followed a surge in claims.

“During the year (ended December 2013), the company experienced an unprecedented number of large claims on fire and engineering policies,” Liberty said in the report. “Our reinsurers have been affected very badly. They have thus revised their 2014 rates significantly.”

The higher claims saw the company’s underwriting surplus in Tanzania more than halved to Sh22.4 million last year compared to Sh47.8 million in 2012.

The parent company Liberty Holdings however saw its net premium earnings rise marginally to Sh4 billion last year, helping to raise its net profit 29 per cent to Sh1.1 billion in the period.

Liberty’s share price has gained 78 per cent over the past six months to trade at Sh20.2. The rally comes ahead of the company’s proposal to pay shareholders a dividend of Sh1 per share in cash or through a bonus issue set at an allotment price of Sh15.9.

The company is set to create 515.2 million new ordinary shares as preparation for future bonus share and rights issues.