Companies

Real buyout helps Britam leapfrog ICEA market stake

britam

Britam managing director Benson Wairegi (right) during the listing of the insurer’s bond on the NSE in August. PHOTO | FILE

Britam’s acquisition of Real Insurance helped the firm to leapfrog ICEA Lion to the position of Kenya’s second-largest insurer, and narrow the market share gap between it and the industry leader Jubilee.

The merged entities Britam and Real controlled a market share of 11.2 per cent as at June, behind Jubilee’s 12.6 per cent, while ICEA Lion came third controlling eight per cent, according to latest data from the Insurance Regulatory Authority (IRA).

ICEA Lion, owned by the former Central Bank of Kenya governor Philip Ndegwa’s family, was in June last year ranked second by market share controlling 9.5 per cent of total gross premiums, ahead of Britam’s 9.1 per cent.

The gap between Jubilee and Britam has narrowed to 1.4 percentage points at the end of June compared to 2.4 percentage points at the end of the first quarter.

CIC Insurance has moved up one place to be ranked fourth with a market share of 7.7 per cent, followed by UAP which dropped to fifth with a 6.8 per cent share and APA with 6.2 per cent to complete the list of Kenya’s top-tier underwriters.

The jostling for market share among the big insurance firms comes against a backdrop of increased deal making and capital raising in Kenya’s underwriting industry.

“The acquisition phase is over. We now want to pause and look at the business and see how we can make it grow,” said Britam chief executive Benson Wairegi at the firm’s half-year briefing in August.

Britam at the end of June completed the acquisition of a 99 per cent stake at Real Insurance in a cash and share-swap deal valued at Sh1.4 billion.

Jubilee has also announced that it is looking at mergers and acquisitions as a strategy to complement organic growth and fend off increasing competition from rivals.

READ: Jubilee Holdings scouts for acquisition targets in Africa

Kenya’s insurance industry saw gross underwritten premiums grow by a fifth in the first six months of this year to Sh76.6 billion compared to Sh63.3 billion in June 2013.

This translates to an insurance penetration rate of about 1.6 per cent of Kenya’s newly rebased gross domestic product.

“We are putting in place policies that enhance the regulatory environment for the insurance sector growth and increase insurance penetration in the country,” said Sammy Makove, IRA chief executive said in the report.

Claims incurred under general insurance business ballooned by a quarter to Sh20.3 billion while payouts and policyholders’ benefits under life insurance surged 47.2 per cent to Sh13.3 as at June.

The IRA data shows that Jubilee controlled premiums worth Sh9.6 billion compared to the combined entity of Britam and Real (Sh8.5 billion), ICEA Lion (Sh6.1 billion), CIC (Sh5.9 billion), UAP Insurance (Sh4.9 billion) and APA with policy covers valued at Sh4.7 billion.

CIC Insurance received applications Sh6.34 billion from a bond issue last week, an oversubscription of 111 per cent over the initial issue of Sh3 billion. The underwriter exercised the Green Shoe option and accepted Sh5 billion.

The listed insurer, majority-owned by Kenya’s co-operative movement, said it would use the cash to invest in real estate and fund regional expansion into South Sudan, Uganda and Malawi.

UAP saw its bond attract bids worth Sh3.19 billion against the Sh2 billion it was seeking. The note is trading at the NSE and offers a coupon rate of 13 per cent.

Britam’s bond managed to raise Sh7.4 billion against Sh6 billion initially planned, mostly to fund real estate projects such as gated communities, shopping malls, office complexes and budget hotels.