Monday, December 29, 2014 8:59 AM / FBN Capital Research
At the end of November France’s Axa announced that it had acquired a 77% interest in Mansard Insurance, formerly GTAssurance, for €198m.
Axa is not the first foreign entrant into the Nigerian market. It joins Old Mutual (Oceanic Insurance), Sanlam (FBN Life Assurance), NSIA Participations (ADIC Insurance) and Greenoaks Global Holdings (Union Assurance).
Axa has taken the well-trodden path to insurance companies in sub-Saharan Africa, following Swiss Re in Kenya (Apollo Investments) and Prudential in Ghana (Express Life).
One driver behind the deals in Nigeria has been the decision by the CBN to reverse universal banking licenses, which has forced banks to divest insurance subsidiaries unless they opt for the holding company structure. This led both GT Bank and UBN to sell off their insurance companies.
The main driver, however, has been the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class. The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, consumer goods manufacturing and advertising.
South Africa’s Sanlam views Nigeria as one of its star markets in Africa, noting that the operation achieved breakeven after little more than two years. It cited figures showing that insurance penetration stands at about 10% in South Africa yet less than 2% in Nigeria. It might have added that the authorities are supportive, and we give the example of the requirement for all companies with at least five employees to provide life cover.
Foreign companies can own insurance firms in full, and we can see their becoming the dominant players in the industry within this decade. This is obviously not the case with banking.
The industry regulator, the national insurance commission (NAICOM), reported a total of N258bn in gross premium income for 2013 and expects N1trn for 2018. The CME has projected N5trn within 10 years .
NAICOM data for 2013 show that the unlisted Leadway achieved the largest gross premium income (N41.8bn). The next four are all quoted on the NSE: AIICO (N22.8bn), Custodian and Allied (N20.5bn), Continental Reinsurance (N13.8bn) and Mansard (N13.6bn).