Real Insurance buyout aids Britam to close gap with Jubilee

Britam’s purchase of rival Real Insurance has seen it narrow the market share gap with leader Jubilee Insurance.

The combined market share of Britam and Real stood at 10.9 per cent in September compared to Jubilee’s 11.9 per cent, according to data from the Insurance Regulatory Authority (IRA).

This has bridged the gap between Britam and Jubilee to one percentage point compared to 4.3 in September 2012.

Britam, which has interests in insurance, real estate and asset management, received shareholder approval last week to buy 99 per cent in Real Insurance in a cash and share swap deal worth Sh1.4 billion.

“The merged entity now makes Britam the second largest insurance firm in Kenya,” said Britam chief executive Benson Wairegi.

“We will benefit from economies of scale and with a bigger balance sheet we can take on bigger risks such as mining, oil and gas.”

The IRA data show that Britam with Real Insurance controlled premiums worth Sh10.79 billion compared to Jubilee’s Sh11.8 billion.

The buyout of Real sparked Britam’s share price rally that has seen it gain 134 per cent over the past six months to the current Sh19.20 — making it the most valuable insurance firm at the Nairobi Securities Exchange (NSE).

Britam is now valued at Sh41.2 billion compared to Jubilee’s Sh18.80 billion.

READ: Real Insurance owners gain from Britam share rally

Jubilee, which has gained 15.33 per cent to Sh314 over the six months, was earlier last year the most valuable insurer at the Nairobi bourse.

Real insurance provides general business like fire, commercial, and motor vehicle risks while Britam had been dominant in the life business. 

Britam says the acquisition is informed by its quest to get a larger share of Kenya’s general insurance like car and house as well as boost its footprint in more African countries.

It has presence in South Sudan, Rwanda and Uganda, but it derives more than 90 per cent of its earnings from Kenya and plans to change this structure in the coming years as the subsidiaries mature.

This means that Real Insurance will give it a presence in Tanzania, Malawi and Mozambique.

An acquisition provides an easy solution compared to a start-up, which could involve buying land, putting up buildings, hiring local staff, seeking regulatory approval and struggling to fight for market share against established rivals.

This the latest buyout to be pursued by Britam, which on November 14 announced a 25 per cent stake in property development firm Acorn as it races for a share of the real estate market.

Its ambitions to ramp up foreign subsidiaries mirror the rush by local insurers including UAP Insurance, Jubilee Insurance and CIC Insurance to open units outside Kenya.