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Swiss Re, one of the world’s largest reinsurance companies, has entered the Kenyan market after it bought a 26.9 per cent stake in the privately owned Apollo Investments for an undisclosed amount.
Apollo announced that Swiss Re Direct Investment Company Ltd, a subsidiary of Swiss Re Group, had bought the stake previously owned by exiting private equity firm LeapFrog.
Private equity firms are normally conservative on transaction details to avoid revealing trade secrets or jeopardising future transactions. The sale has allowed LeapFrog to exit an investment in the Kenyan insurer first made in 2011.
Apollo said it will leverage on Swiss Re to continue expanding in the region and to list on the Nairobi Securities Exchange (NSE) in the future.
Swiss Re was one of the firms linked to a possible buyout of Kenya Re early last decade but shied away in the early stages of the engagement.
“To attract a stable and long-term shareholder of this size, calibre and reputation marks a coming of age for Apollo. We will continue to pursue our strategic ambition to build East Africa’s premier insurance brand and our future plans for a public listing,” said Apollo chief executive Ashok Shah in a statement.
Apollo had an asset base of Sh20 billion and a Sh250 million capital base as at June this year. Swiss Re is the second large insurance firm to buy into a local firm in the last couple of weeks possibly pointing to an industry shake-up.
Prudential Plc of the UK bought Shield Assurance in a Sh1.5 billion investment, an acquisition it said would enable it expand to the rest of the East African region.
Analysts said despite the low-penetration rate there is an opportunity for massive growth due to better regulation, an increase in the number of people who can afford insurance and better distribution channels.
Francis Mwangi, head of research at Standard Investment Bank, compared the insurance industry to the banking industry of 10 year ago.
Mr Mwangi said the regulations on ownership and capitalisation being enforced are improving the business environment just like it happened in banking, adding that technology was also making it easier to collect payments.
“It is now possible to pay for premiums through the mobile phone and bancassurance,” he said.
Despite the low penetration rate of 3.6 per cent regulators have said the local industry is fast growing when compared with other frontier markets.
For the private equity firm LeapFrog, the exit in Apollo will be the second African departure after it sold its investment in Ghana’s Express Life.
“Our experience with Apollo and our recent successful exit from Express in Ghana has shown that investors with specialist skills and intimate knowledge of the market can add value to local businesses. We are delighted to have been part of an interesting phase in the development of Apollo,” said LeapFrog partner Doug Lacey.
LeapFrog first entered into Apollo in 2011 by buying a minority stake worth Sh1.2 billion.
– Business Daily