Liberty Considers Acquisition Targets Among Kenyan Insurers
11 July 2016, 20:32
Nairobi - Liberty Kenya Holdings Ltd. is considering as many as 10 acquisition
targets as part of the insurer’s five-year strategy to increase its
foothold in East Africa’s biggest economy.
“That is on the cards
if we can get a suitable candidate,” Managing Director Abel Munda said
in an interview in the capital, Nairobi. “We have a number of companies
in the country that would be a good fit if they would be up for
Kenya’s fourth-largest insurer is making a push to
bolster its size in life and property and casualty cover after
regulators in June introduced new rules that as much as doubled the
amount of capital underwriters need to set aside as buffers in stages
through to 2018. Liberty Kenya in 2015 withheld its dividend to cope
with the new rules after a decline in the value of its listed equities
and bonds contributed to a 36 percent drop in full-year profit.
Liberty Kenya is a unit of Johannesburg-based Standard Bank Group
Ltd.’s Liberty Holdings, which has a presence in 17 African countries
after following the continent’s biggest lender into many of the markets.
The stock has declined 32 percent in Nairobi this year, compared with a
4.6 percent decline in the FTSE NSE Kenya 25 Index.
regulations will trigger a rush by “many insurers who are merely getting
by” to raise capital, Munda said. “There are companies finding it
challenging to comply and may seek partners to try and infuse capital.”
Insurance Regulatory Authority is also implementing so-called capital
charges, which will force companies to park 40 percent of the value of
their property investments and 30 percent of their stock holdings with
the regulator. This comes after the Association of Kenya Insurers lost a
bid to convince authorities to delay by two years the implementation of
changes to the country’s laws that increased the amount of capital
companies must set aside.
Short-term insurers need to hold 600 million shillings ($5.9 million)
in paid-up capital by 2018, from 300 million shillings previously,
while long-term insurers need to set aside 400 million shillings from a
prior level of 150 million shillings. The regulator can force companies
to boost their capital levels to as much as 20 percent of net-earned
premiums from the previous year based on the authority’s own assessment
of risk the company is exposed to.
implementation of the risk-based supervision model is “likely to
enhance compliance, which in turn will improve the solvency of the
industry as a whole and lower its risk,” Elizabeth Ndirangu, an analyst
at Genghis Capital Ltd., said in a report released earlier this year. It
may also result in “less price undercutting” as insurers deemed as more
risky will be forced to sell their policies at levels that will help
them cope with the higher capital requirements, she said.