East Africa’s largest insurer Jubilee Holdings recently struck a Sh10.8 billion deal with Allianz SE, the largest general insurer in the world.Jubilee chairman Nizar Juma spoke to the Business Daily about the state of business now given the Covid-19 disruption and what the deal with the German insurance firm means.
The Covid-19 health crisis has quickly morphed into a financial crisis, triggering massive job losses. What is the likely impact on credit life covers?
Covid-19 has increased retrenchments and definitely the payouts will rise. But at the moment, we have not adjusted the pricing of credit life covers.More banks are now asking for credit life covers that take care of retrenchment. Traditionally, they have been more concerned about death and disability.Retrenchments look set to go up in case the infections spike rapidly so probably in the long run, the premiums for credit life covers will be adjusted upwards.
Are withdraws and surrenders a big concern for insurers like Jubilee right now?
Yes, they are. It is happening with our life policies and pension plans. Either people are stopping contributing or they want part of their funds back to survive the economic difficulties.We are trying hard to persuade people who can’t keep contributing to keep their accounts dormant. Even if they are not paying we are not cancelling the policies.The cancellation of life policies started by going up by between 20 and 30 percent but has reduced. Some are just scared that insurance firms may go burst.Our team is making between 15,000 and 20,000 calls per month to our policy holders asking them not to cancel the covers.The figure of loans on life policies has also gone up in the last three months and I think this is expected as a way of making ends meet.
How do you manage business in such a situation where there is less business coming in and existing customers are talking about surrenders and withdrawals?
We are in a fortunate situation because nearly half of our business is non-insurance. This is where diversification of revenue streams counts a lot.When things go bad in insurance, we can always make up elsewhere. We have maintained a strong balance sheet and we don’t have to look for money to pay claims.
How far is Jubilee in cutting its reliance on earnings from the Nairobi Securities Exchange (NSE) investments?
We are buying practically no stocks in the stock market. We stopped buying new shares at the NSE three years ago. Where possible, we are ditching stocks.We are less dependent on the stock market right now. We have taken a similar stand on property investment.Our properties are primarily those for our own needs as opposed to investment purposes. For instance, we have one in Nairobi, Mombasa, Kisumu, Kampala and Burundi but mainly for our office needs.We believe in investments that are good for investors and not just for making a statement. NSE and property investments have condemned many insurers into unstable returns.
Nairobi county accounts for over 80 percent of industry premiums. Does this mean there are no much insurable risks outside the capital?
It is more about education. We have branches there but I don’t think we are doing enough work in making them understand insurance.The industry has had many unscrupulous agents who go talking nicely, overpromising and taking money. In the end we suffer when people say they relied on lies to buy insurance products. As Jubilee, we are now talking to more banks through bancassurance because banks have more exposure and trusted more.Many customers would rather buy insurance products through banks than directly through our insurance branches.
Last year you separated your business into four: medical, general, life and financial services. What does this mean for Jubilee?
The separation has helped improve our business. We now have a clear picture of our short-term and long term business and the turnovers have improved.Each company has their own CEO and business development team and we are therefore able to have distinct goals for each unit.
You carried out a Sh10.8 billion strategic deal with Allianz SE. Why sell out a stake yet you look very stable?
We have been talking with Allianz for the last four years but keeping it very quiet. So many major companies have come asking for a piece of Jubilee but we turned them down because the only thing they were offering was money. Our balance sheet shows that the last thing we needed out of a strategic transaction was money.We found in Allianz a strategic partner that can take our general insurance to the next level. And so we accepted.
Where do you want Allianz to take your general insurance business?
Allianz is the largest general insurer in the world and that means there is so much more to just the money.Our general insurance business has been growing gradually but that is not the pace we want. We want something that takes us up there so quickly through the state of the art in IT systems.We are looking at how, as quickly as possible, we can go into new areas including artificial intelligence and robotics.We also want our current products to catch up with what is offered in markets such as Europe and North America. We think Allianz will give us all the support.
What is Jubilee giving away in this deal?
We are only taking the best from each other and forming a new outfit called Jubilee Allianz General insurance company. Allianz Kenya will be taken over by this new company.The Allianz-Jubilee transaction constitutes eight percent of Jubilee Holdings Limited’s net assets. We believe we got a very good price because we are a premium company.
Which new opportunities do you see with the to-be Jubilee Allianz General Insurance?
The legal process of creating this company is ongoing.The boards of both companies have signed agreements and completion of the transaction will happen once we obtain shareholder and regulatory approvals.The new company will make us very strong. We will be able to take on larger insurance businesses.We expect it to improve a lot and quickly in the next couple of years due to improved covers and new products.