Pan Africa Insurance Holdings is seeking a return to the general insurance business through acquisition of a majority stake in privately owned underwriter Gateway Insurance.
The listed life insurer, majority owned by South African Sanlam, exited the non-life business three years ago when it sold 40 per cent share in APA Insurance. APA was formed in 2003 by merging short-term business arms of Apollo and Pan Africa.
“The board of directors of Pan Africa Insurance Holdings wishes to advise that it has entered into an agreement with Gateway Insurance which may culminate in the acquisition of a controlling shareholding of the company,” said Pan Africa in a public notice.
Pan Africa Insurance has been losing out in the life business with its market share dropping to 12.5 per cent last year from 15.5 per cent in 2012.
Its profit-after tax dropped by more than half in the six months to June. The company posted an after-tax profit of Sh390 million in June compared to Sh800 million in the same period last year.
The firm noted the value of its new business declined by 22 per cent following pressure on annuity and individual life margins due to high competition.
Attempts to get comments from Pan Africa were unsuccessful with the management said to be locked in long-day board meeting.
Pan Africa’s interest in Gateway comes soon after Britam Insurance acquired Real Insurance highlighting the growing competition in the sector that has seen the big players move to become full financial-service providers.
Pan Africa rebranded Sanlam Asset Managers to Pan Africa Asset Manager as it pushed to consolidate its presence in the industry.
Gateway Insurance’s main business is the motor vehicle, personal and public underwriting. It controls 0.64 per cent of the general insurance market, the second smallest market share.
Gateway has, however, been a long-term player in motor vehicle segment which has seen others like Stallion, Liberty, Lakestar, and United fall by the wayside.
“The critical issue is not underwriting profit or losses, but the net assets which indicate growth potential,” said Isaac Ngaru, managing partner at Ngaru and Associates.
Gateway’s total assets stood at Sh2 billion at the end of last year. The firm is associated with the family of the late Godfrey Karuri, who is currently represented on the board by Jelioth and Cynthia Karuri.
Other principal shareholders are current chairman Isaac Wanjohi and Nigerian Chief Ezekiel Onwere.
Pan Africa’s share price at the Nairobi Securities Exchange gained 5.1 per cent in Tuesday’s trading following the announcement, to average Sh122 compared to the previous day Sh116.
The share touched an intraday high of Sh130 a share.
Insurance penetration in Kenya is 3.4 per cent indicating growth potential.
The country has witnessed increased deal making in the insurance sector over the past two years as investors rush into the sector which recorded a 20 per cent growth last year.
“It is a red hot sector and clearly there are a lot of acquisition activities. Most of the global insurance companies are looking to enter the market,” Aly Khan Satchu, a trader and analyst, told Reuters Tuesday.