CFC Insurance wins reprieve on shareholding rule

Finance minister Uhuru Kenyatta has exempted CFC Insurance Holdings from the law that bars insurance companies that have less than a third of local shareholding to operate in Kenya paving the way for its listing at the Nairobi Stock Exchange.

CFC Stanbic Holdings-—whose business spans selling shares, banking, insurance and investment banking— moved to separate the insurance unit from the group and list it’s separately at the bourse.

This led to the creation of CFC Insurance Holdings (CfCIH), which is owned 24.95 per cent Liberty Holdings of South Africa, 53.11 per cent by CFC Stanbic Holdings and 21.94 per cent by local shareholders under the investment vehicle African Liaison and Consultants.

The lower than a third shareholding by local investors made it difficult for the firm to be licensed by the Insurance Regulatory Authority (IRA) as an operator and stalled its listing at the NSE, which was to happen last October.

But these hurdles were cleared by the finance minister on December 14 and gazetted on February 11 after it exempted the South Africa investors from Section 22 of the Insurance Act—which provides that local investors should control more than a third of insurance companies running in the country.

“The Minister for Finance exempts CFC Life Assurance Limited from the provisions of section 22 of the Act, in connection with the acquisition and ownership of ordinary shares in the CFC Life Assurance Limited by CFC Insurance Holdings Limited,” said Mr. Kenyatta in the gazette notice.

The law was introduced in the 1970s to ensure that Kenyan citizens invest in insurance business that was previously dominated by British companies with colonial roots while protecting local consumers from foreign dominated firms.

The formation of CfCIH comes as a result of the separation of CfC Stanbic Holdings Ltd’s banking and insurance businesses in a move aimed at strengthening management focus in its business units.

Heritage Insurance Company Limited will also come into the ambit of CfCIH in a transaction that has also been exempted by the finance minister.

The demerger has been in the cards since Standard Bank consolidated its presence in Kenya’s banking sector through a 60 per cent stake acquisition of CfC Holdings Ltd in 2008.

The key target in the merger was CFC Bank Ltd, but with CfC Holdings’ ownership of two insurance firms and a stock brokerage firm, Standard Bank found itself the majority shareholder in an integrated financial services firm.

The demerger will lift a burden off CFC Holdings Limited which saw its earnings remain sluggish in the face of trying times for its insurance firms.

It now seeks to give Liberty Life--which is South Africa’s third largest insurer and a subsidiary of Standard Bank,—control of its board and executive suite in a move aimed at reenergizing the profits of the insurance unit.

Liberty Life’s anchorage in CfCIH will provide the Standard Bank Group with an opportunity to drive bancassurance and insurance linked investment products while easing the management burden off CfC Stanbic Holdings’ shoulders.

Players in the sector reckon that the entry of Liberty group, which controls assets worth nearly a trillion shillings, into the local scene will change the way local insurers operate.

Its listing this year will bring into two, the number of insurance companies planning to enter the Nairobi Stock Exchange.