Archive for the 'Insurance' Category

Conference: Pensions and Alternative Investments Africa 15-16 March

How fast-growing pensions can transform African economies

Africa’s pension and institutional savings industry is crossing the threshold into a major growth path. Channelled appropriately, they can transform Africa’s business and investment landscape and boost economies and savings.

Institutional savings – pension, insurance and other funds – are emerging as transformative forces for Africa’s economies. Industry leaders and others will discuss it at AME Trade’s Pension Funds & Alternative Investment Africa Conference (PIAFRICA), to be held in Mauritius from 15– 16 March.

The theme is “How can we leverage pension and investment funds for the development of Africa?” Pensions in 10 African countries were tallied at $379 billion in assets under management (including $322bn in South Africa). It is forecast that pension funds in the six largest sub-Saharan African markets will grow to $622bn in assets by 2020 and to $7.3 trillion by 2050.

The aim of the PIAFRICA conference is to debate whether the environment is being created for these funds to go into productive investments that will ensure their members get good returns and that contribute effectively to Africa’s growth. PIAFRICA will bring together the leaders of pension funds and institutional investors, policymakers, regulators, capital-markets, private equity and other stakeholders and is endorsed by the African Securities Exchanges Association (ASEA)

Discussions will focus on maximizing Africa’s pension fund and institutional investor opportunity, and will revolve around the following topics:
• Key trends, challenges and opportunities for Africa pension funds, Insurance, mutual and social security funds
• Africa’s growing funds and their potential to develop capital markets
• How to achieve long-term benefits through investing in infrastructure and other alternative assets, including real estate
• Private equity as an investment avenue for pensions
• For and against more latitude to invest across African borders?
• Best practices for sustainable growth and trust in funds
• Capacity building and support tools
• Technology, fund administration and member services
• Country profiles: African pension funds

Top speakers confirmed to date include:

  • Doug Lacey, Partner, Leapfrog Investments
  • Eric Fajemisin, Chief Executive, Stanbic IBTC Pension Managers
  • Mr PK Kuriachen, Chief Executive, Financial Services Commission
  • Ernest Thompson, Director General, Social Security & National Insurance Trust
  • Krishen Sukdev, CEO, Government Pensions Administration Agency
  • Richard Arlove, CEO, Abax Services

For more visit http://ametrade.org/piafrica/. For media accreditation and interviews contact Barbora Kuckova, Marketing Manager, AME Trade Ltd, Tel: +44 207 700 4949 Email: barbora@ametrade.org

DFIs hunt long-term gains in African financial services

Highlights of the African Financial Services Investment Conference AFSIC 2016, held in London 5-6 May.

Development finance institutions have made $6.5bn of investments in financial institutions. Here are examples of what they are doing:

Proparco, Sophie le Roy, Head of Banking and Capital Markets: “We are 50% invested in Africa and financial services and banking make up 50% of our portfolio. Our aim is to catalyze private investors, we show you can invest and make profit. We have a careful process, we helped create banks in Mauritania, Benin and DRC and they still exist.”

BIO (Belgium), Carole Maman, Chief Investment Officer: “We have Eur600m under management, Africa is about 40% of portfolio, most of it is invested in financial institutions. We work on smaller transactions, our sweet spot is from EUR 6m+. We work mostly with tier 2 financial institution through microfinance, equity and loans. In countries such as Ethiopia and DRC where many people are unbanked, there will be lots of opportunities.”

FMO the Dutch development bank, Bas Rekvelt, Manager Financial Institutions Africa: “We have been investing in developing countries for 45 years, we have been able to catalyze EUR 1bn into the markets last year. We try to ensure the markets where we work are attractive enough for the private sector. Our portfolio is 25% Africa, spread between financial institutions, energy and agriculture.”

SIDA, the Swedish International Development Cooperation Agency, Christopher Onajin, Loan and Guarantees Partnerships & Innovation: “Our role is to give money and guarantees, covering credit risk and market risk. Our Africa portfolio is $135m, and we encourage banks, microfinance and others to push them to lend to under-served sectors.”

DEG – German Development and investment company, Peter Onyango, Investment Manager, Financial Institutions Group, Africa: “We have about 50 years of emerging markets expertise and Africa is a particular focus. We see more countries becoming bankable. Internally our risk appetite is improving, we see opportunities in more countries. We see opportunities in growing insurance and the nascent leasing markets, which will improve. There is a lot more in fintech. A setback for Africa is an opportune time for long-term investors, including DFIs and private investors.”

More weather index insurance for African smallholder farmers

Weather insurance is a financial product aiming to help African farmers manage the volatility of drought and other weather crises. This week (14 Jan), IFC (www.ifc.org) signed 2 grant agreements with MicroEnsure Ltd to make more index-based weather insurance available to small-scale farmers in Rwanda and Zambia. Index-based insurance pays out on the basis of agreed weather data, such as rainfall as measured being lower than an agreed level, and is more efficient risk management tool than traditional indemnity-based agricultural insurance, which runs up high transaction costs and premiums.

The grants, valued together at about $650,000, aim to help mitigate the adverse effects of climate change and to strengthen food security. The funds come from the Global Index Insurance Facility (GIIF), which is a multi-donor trust fund implemented by IFC and the World Bank and funded by the European Union, Netherlands and Japan.

The GIIF grants are expected to help MicroEnsure to offer index-based insurance to an extra 90,000 small-scale farmers in Rwanda within 2 years and 15,000 small-scale farmers in Zambia within one year. Index-based insurance, which pays out benefits on the basis of weather data without costly field verification of losses, is a more efficient risk management tool.

Much of the farmland in Rwanda and Zambia, as in many other parts of Africa, is irrigated only by rain, and certain regions are vulnerable to drought from too little rain and floods and destruction from too much rain. To limit their losses due to extreme weather, smallholder farmers make minimal investments into their land, leading to reduced yields and continued food insecurity.

UK-based MicroEnsure has been operating since 2002 and works with mobile-network operators, banks, microfinance institutions, and other aggregators to provide insurance for the mass market. Shareholders include some of its managers and IFC, Omidyar Network and Opportunity International, which created MicroEnsure in 2005. It has a regional base in Nairobi and country operations across Africa and Asia. It has twice been awarded the Financial Times/IFC Sustainable Finance Award. The company has worked with local insurance companies in India, Malawi, the Philippines, Rwanda and Tanzania.

In Rwanda 90% of the labour force work in agriculture and in 2010 IFC agreed with MicroEnsure to design and provide index-based insurance and develop an outreach network to small farmers, while scaling up the insurance into a commercially viable and sustainable product. By March 2012, 6,208 maize and rice farmers were reported to be covered with weather station and satellite index products, with the aim to boost coverage to 24,000 farmers by December 2013. It works in Rwanda with Urwego Opportunity Bank which is a subsidiary of Opportunity International and local insurance companies Sonawara and Soros.

In Tanzania, MicroEnsure’s pilot project (Dec 2011-Apr 2012) worked to provide weather index insurance to 24,000 Tanzanian cotton farmers through the Tanzanian Cotton Board, supported by Gatsby Foundation, local underwriter Golden Crescent and a technical partnership agreement with reinsurer Swiss Re. It covers cover for value of inputs provided to farmers on credit.

IFC has also backed Kilimo Salama (“safe agriculture”) in Kenya to offer cover for inputs in the event of drought or excessive rainfall, in a partnership between Syngenta Foundation for Sustainable Agriculture and Kenyan insurance company UAP. Also available is cover for farm-output value, estimated on the expected harvest. A Nov 2010 grant from GIIF encouraged Syngenta to develop the product further, which uses weather stations to collect rainfall data and mobile SMS technology to distribute and administer payouts. It

For more information see IFC website on Rwanda and Tanzania and on Kenya.

Richard Leftley, CEO MicroEnsure and MicroEnsure Asia, said in an emailed press release: “As a pioneer in the provision of weather-index insurance to smallholders since 2004 we have seen the impact that these products have in unlocking credit to fund inputs, resulting in a dramatic increase in yields and rural income. Our on-going relationship with the team at IFC has been central to our growth in this sector.”

Gilles Galludec, IFC GIIF programme manager, said: “There is great potential for index insurance to strengthen economic security for smallholder farmers in Rwanda and Zambia while also serving to further the development of sustainable insurance markets in both countries. A reduction in weather-related risks also stimulates investment in farming by making it viable for financial institutions and agribusinesses to extend credit to smallholder farmers for long-term investment in the land. Index-based insurance is a powerful tool in the fight against poverty.”

GIIF is a multi-donor trust fund, launched in Africa in 2009, with the aim of expanding use of index insurance as a risk-management tool in agriculture, food security and disaster-risk reduction. It supports the development and growth of local markets for indexed/catastrophic insurance in developing countries, primarily in Sub-Saharan Africa, Latin America and the Caribbean, South Asia and Southeast Asia.

IFC is a member of the World Bank Group and focuses exclusively on the private sector, working with enterprises in more than 100 countries. Investments climbed to an all-time high of nearly $25 billion in the financial year 2013 www.ifc.org

The International Livestock Research Institute (www.ilri.org) is another organization backing index-based insurance, this time offering livestock cover for vulnerable pastoralists in Kenya and Ethiopia to cut climate-related risk. The product is called index-based livestock insurance and was launched in Marsabit District of Kenya in Jan 2010 with insurer UAP (it made payouts in Oct 2011 and Mar 2012) and in Ethiopia’s Borana zone in Jul 2012. For more information, see here. The product uses econometrics to measure links between livestock mortality and a Normalized Difference Vegetation Index (NDVI).

First global company lists on Stock Exchange of Mauritius

The first offshore company was approved to be listed for trading on the Stock Exchange of Mauritius (SEM). The company has a Global Business Licence Category 1, which is more stringent than GBL 2, and the listing is in line with a new Chapter 18 of the regulations. The Financial Services Commission of Mauritius licences global business sector companies.
The listing of the ordinary shares of Evisa Investments Limited was approved on 28 February for the SEM’s Official Market. Evisa is a holding company and its primary investment is in Cannon Assurance Ltd, a company incorporated since 1967 in Kenya. Evisa has 1,000,000 Ordinary Shares of US$5.45 each in issue. Its main objective is to provide its shareholders with dividend income and long-term gain through expanding and diversifying its investments.
Chapter 18 addresses specific requirements for corporations holding a GBL 1 licence and certain types of debt instruments targeted to special categories of investors, including “expert investors”, as defined in the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008.
According to a press release, the listing of GBL 1 companies is in line with SEM’s internationalisation strategy, and fosters the development of synergistic links between the Global Business Sector and the Stock Exchange of Mauritius. It also fits with the overall objective of positioning Mauritius as a jurisdiction of substance.
The SEM was incorporated in Mauritius on March 30, 1989 under the Stock Exchange Act 1988, as a private limited company responsible for the operation and promotion of an efficient and regulated securities market in Mauritius. Since October 2008, the SEM has become a public company, and over the years the Exchange has witnessed a significant overhaul of its operational, regulatory and technical framework to reflect the changing standards of global stock markets. Mauritius is well poised to become a leading base for funds investing into Africa from all over the world, including from India and China and there is potential for more listings.
SEM is today one of the leading Exchanges in Africa and is a member of the World Federation of Exchanges, the South Asian Federation of Exchanges, the African Securities Exchanges Association and the Committee of SADC Stock Exchanges. SEM is an Approved Stock Exchange by the Cayman Islands Monetary Authority and a “Recognised Stock Exchange” by Her Majesty’s Revenue & Customs in UK.
Evisa is a public company limited by shares, incorporated on 16 May 2002 and licensed by the FSC to operate as a GBL 1 company. The company secretary and registered office address of Evisa is International Management (Mauritius) Limited, Les Cascades Building, Edith Cavell Street, Port Louis.

Kenyan IPO only 60% subscribed but regional plans go ahead

Kenya’s financial services holding company British-American Investments Company Ltd.(www.british-american.co.ke) issued a statement on 23 August outlining that its initial public offering (IPO) had only attracted 60.09% of the targeted KSh5.85 billion ($63million). The company owns 2 insurance firms and an asset manager and said it will reconsider its plans, which had included real estate and regional expansion, including in South Sudan.
The listing was previously detailed on this site here.
The company successful raised KSh3.5bn by selling 390.6m shares at KSh9.00 each. It meets the minimum 50% requirement in its prospectus to go ahead and with 28,000 shareholders is permitted to list on the Nairobi Stock Exchange main board. The shares are due to start trading on the Nairobi bourse on September 2.
According to stockbroking analysts, foreigners were largely absent due to risk aversion and worries about the Kenyan economy. Reuters quotes George Bodo, a research analyst at ApexAfrica. “The timing of the IPO came … when the global markets were risk averse and foreign investors were cutting risky positions internationally.” International problems include the US economy and the eurozone debt crisis. “It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya,” said Group chairman Nicholas Ashford- Hodges, according to a report in “Business Daily” newspaper.
Foreign investors normally account for 70% of action on the NSE, but Reuters says they are less active and this has been made worse as the Kenyan currency declines against world currencies.
Local retail investors recorded the highest participation, taking up 70.9% including a 142% oversubscription of the 195m shares offered to them; qualified institutional investors hung back and took up 23.7%, just over a third of their 240.5m shares allocation; employees, agents and individual life policyholders snapped up 5.2% and foreign investors were almost absent, taking up only 0.3% of the offer, less than 1% of the 195mn shares reserved for them.
Analysts said the poor macroeconomic environment in Kenya did not augur well and inflation in Kenya hit 15.53% in July, driven by food and fuel prices. Rising interest rates have dissuaded many investors from seeking funds from banks to invest in shares and banks were also not willing to take shares as collateral. Gregory Waweru, an analyst at Kestrel Capital, was reported as saying: “There was competition for funds due to tight liquidity in the market.” Many investors have not yet realized substantail returns from East Africa’s biggest IPO which was Safaricom’s listing in 2008.
British American had planned to spend KSh2.5bn on property development and group managing director Benson Wairegi said in a statement: “The property development initiative where the bulk of the funds were targeted will be reviewed with a view to scaling it down.”
The company was also to set aside KSh1bn for regional expansion and KSh1.28 bn to expand its Kenyan operations, including the asset management business and to launch new funds for Kenyans in the diaspora as well as local and international investors and to comply with a proposed law for real estate investment trusts.
Mr Wairegi said the company may consider using bank loans to finance other planned projects: “The group has no other gearing despite the very strong balance sheet, which has become even stronger with the raising of KSh3.5bn. We shall, therefore, be able to easily leverage to implement all the profitable projects that have been lined up,” according to a report in “Business Daily”.
British American launched a Ugandan subsidiary in July and at the time the chairman said next stop would be to open offices in Rwanda, Tanzania and South Sudan.

British American Investment launches Kenya IPO

British American Investment Company (Kenya) Ltd (www.british-american.co.ke) launched its initial public offer (IPO) on 12 July, aiming to list on the Nairobi Stock Exchange. It aims to raise KES 5.58 billion (US$62.2 million) for expansion in the offer which is open until 5 August.
British American is issuing 650 m new ordinary shares at KES9 each. East African retail investors and foreign investors have each been allocated 30% of the shares, institutional investors 37% and employees, agents and individual life policy holders get the remaining 3%.
The offer was launched by Prime Minister Raila Odinga. He urged more people to use insurance products, and said market penetration is only 2.3% of GDP, according to Kenyan Broadcasting Corporation. The Standard newspaper reports him saying “I would like to take this opportunity to assure investors that Kenya is on a renewal path.”

Expansion: “missing middle” and new products
According to a report in Kenya’s Business Daily newspaper, of the money raised KES1 bn will be used for new investments and entry into the regional market while KES 1.3 bn would be used to grow its Kenyan insurance businesses and to expand its asset management business, including launching new funds for Kenyans in the diaspora as well as local and international investors.
The company will use KES2.5 bn to set up real estate investment trusts when the proposed law comes into effect and to develop property investments, including commercial buildings and housing units. KES750 m is to offset a loan from Commercial Bank of Africa (CBA) and KES 300 m is for offer expenses.
The paper reports British American’s chairman Nicholas Ashford-Hodges saying funds raised would be used to boost the company’s operations in Kenya and expand to regional markets: “This IPO will give British American an opportunity to increase the scope of its operations and widen its footprint.”
The company hopes to seize emerging opportunities through innovative products such as micro-insurance and bank-assurance. According to the Standard, managing director Benson Wairegi said the company is developing more products for the retail market and small and medium-sized businesses: “We seek to fundamentally redefine the scale and scope of the insurance sector in Kenya and the wider region. Our established model of scale, reach and multi-layered selling will also be extended to the retail market and SMEs in the wider geographical region.”

Regional expansion – Uganda, Tanzania, South Sudan, Rwanda

On 7 July, BAT launched an insurance services business in Uganda through a subsidiary, Britam Insurance Company (Uganda) Limited, which has a capital of UGX5.6 bn ($2.2m). It also aims to open offices in Tanzania, Rwanda, and Southern Sudan.

Profit turnaround
British American is also the holding company of British American Insurance Company (Kenya) Ltd and British American Asset Managers Ltd (BAAM).
The market capitalization of the new company will be KES19.4bn ($216.3m), the highest among listed insurance firms. CfC Insurance Holdings, which was listed by introduction in April, was valued at KES6.85bn as at the close of trading yesterday, Jubilee Holdings Ltd at KES8.86bn, and Pan African Insurance at KES1.92bn, according to the paper.
Business Daily reports that British American Group posted KES2.7 bn in profits after tax last year, up from KES421 mn loss in 2009. The company made KES4.68 bn (KES 196m in 2009) in investment income and KES220 m (KES 32 m) in other income.

Algiers Stock Exchange: Results of Alliance Assurances IPO offer

Results have recently been released of the share offer of insurance company Alliance Assurances (www.allianceassurances.com) on the Algiers Stock Exchange (www.sgbv.dz). The share offer was open from 2 November until 1 December and was oversubscribed, with private individuals flocking to receive the shares. Alliance aims to be the first private company to list on the Bourse d’Alger. It was one of the last IPOs or public offerings of shares on the African stock exchanges in 2010.
According to the official announcement from the Bourse d’Alger total of 1,804,511 shares were subscribed, the full amount offered, at a price of 830 Algerian dinars (USD11.17) each.

IPO Offer allocation
The offer was allocated as follows:
Section A: 33.3% (600,000 shares) for individuals with Algerian nationality: received 1,338,346 shares of 74.17% of the total. There were a total of 5,374 applications of which 5,284 each applied for less than 3,591 each and were allocated in full, while the remaining 90 applicants got 3,591 or 3,592 shares each.
Section B: 28.5% (514,286 shares) for institutional investors: received 181,625 shares or 10.07%. There were 4 applicants of which 3 each applied for less than 60,240 and were allocated in full and one applied for more and received 60,240 shares.
Section C: 28.5% (514,285 shares) for Algerian companies: received 186,022 shares or 10.31%, all who applied were allocated.
Section C2: Subscription Right, allocated 90,226 shares, received 100% of the allocation, all who applied were allocated.
Section D: 2.37% (42,857 shares) for insurance brokers and were allocated 3,635 shares (0.2%), all who applied were allocated.
Section E: 2.37% (42,857 shares) for the company’s employees across the 35 Algerian provinces, of which 4,657 shares were subscribed, 0.26%, all who applied were allocated.
The financial adviser for the offering is Nomad Capital (www.nomadcapital.com – website still says “under construction”), with PriceWaterhouseCoopers and Hadj Ali.
According to a previous report, General Manager Hacen Khelifati said that the company would also sell 30% to an unnamed European company in a separate transaction, which awaits regulators’ approval. He was also reported as saying that the company would benefit from government incentives to encourage listing including a 5-year tax holiday on profits from the operation in order to raise new capital for development and to help revitalise the Algiers Bourse.
Alliance plans to use the capital to meet new regulatory requirements and to set up 2 new subsidiaries:
• A real estate asset manager to maximize value for Alliance and third-party investors;
• A venture capital vehicle dedicated to investments in sectors related to the insurance field.
Alliance Assurances already has two subsidiaries: ATA, and a dedicated IT engineering subsidiary named ORAFINA.
Alliance Insurances is a joint-stock company created in July 2005 and says it is now a multiline insurance company with more than 300,000 insured clients and total net premiums in 2009 of 2.8 billion Algerian Dinars with a net profit of 312 million Algerian Dinars, providing a 39% return on equity, according to a press release.

About the Bourse d’Alger
The Société de la Gestion de la Bourse des Valeurs Mobilières was set up in 1997 under a 1993 law and started trading in 1999. The bourse website says the listed equities are Egh el Aurassi (state-owned hotel) and Saidal (state-owned pharmaceutical company) while the listed debt securities are Algerie Telecom, Spa DAHLI and Sonelgaz securities. Trading takes place twice a week, on Monday and Wednesday mornings for two hours.

Support for Farmers to Access Weather and Disasters Insurance

A Global Index Insurance Facility has been launched as an insurance scheme to help compensate for certain catastrophic events, depending on their severity. For example, insurance will be paid out in the event of a wind storm of a certain category, drought defined as rainfall below a certain agreed figure, or an earthquake registering a certain magnitude on the Richter scale.

Index-linked insurance products eliminate the need for insurance companies to individually verify claims, reducing transaction costs and making it easier for them to offer products and services in rural communities and in frontier regions, where insurance is rarely available.

The International Finance Corporation (www.ifc.org), a member of the World Bank Group, in partnership with the European Commission and the Netherlands’ Ministry of Foreign Affairs, on 2 December in Kenya launched a programme to help farmers and others in developing countries more easily access this insurance.

Bernard Rey, Head of Operations of the European Union Delegation to Kenya, said, “As the threats posed by climate change increase, the GIIF will help people in Africa, the Caribbean, and Pacific regions reduce their vulnerability to external shocks and natural disasters and thereby support their livelihoods.”

Jean Philippe Prosper, IFC Director for Eastern and Southern Africa, says in a press release: “The GIIF will help protect farmers and vulnerable communities against natural disasters that can wipe out their livelihoods and trap them in poverty. IFC is committed to helping extend financial products and services to places where the private sector is at the early stages of development, creating more opportunities for people that need them the most.”

The facility is backed by a programme of advisory services and capacity building that will provide funding to raise the capacity of insurance companies to provide index-based insurance, help develop such products, and work to create a favorable regulatory environment by advising governments on possible regulatory changes.

The European Commission has committed €24.5 million as the first donor to a trust fund to finance the advisory services support. The fund is also supported by the Dutch Ministry of Foreign Affairs.

IFC supports private sector development, mobilizes private capital, and provides advisory and risk mitigation services to businesses and governments. New investments totaled $14.5 billion in fiscal 2009.It is seeking to increase its capital increase and create more opportunity for the poor in developing countries, including helping farmers and others access insurance.