What happens after `minnow’ swallows former giant of Uganda’s insurance sector?
When regional insurance firm Lion Assurance Company (LAC) confirmed plans to take-over agents and business formerly under the American International Group (AIG), the first question was “how?”
AIG-Uganda has been the third leading insurance company by assets in Uganda, while LAC has been the fourth biggest. But the gap between them, in terms of market share, has been marginal. AIG controls 8.8% market share out of 21 licensed insurance firms offering non-life insurance policies while LAC holds only 7.6% market share.
But the American firm had been the market leader in Uganda until the 2008 financial crisis that weighed down the firm, and consequently led it into ceding its position to Jubilee insurance, which boasts of 23.22% market share as at the end of 2015.
So when AIG announced it was withdrawing from the Ugandan market and the fate of its big client base and agents was initially being discussed, most eyes turned to Jubilee – until LAC confirmed its takeover move.
And the numbers appear to confirm that LAC is, in fact, well-positioned to swallow AIG. While AIG has had a sliding trend, LAC in sharp contrast, has seen positive growth in its gross underwritten premiums.
Data from the Insurance Regulatory Authority of Uganda (IRA-U) shows that AIG’s gross underwritten premiums stood at Shs41.04billion in 2015, down from Shs42.93billionin in 2014 and Shs50billion in 2013.
In 2012, the insurance firm generated Shs45billion in gross underwritten premiums, Shs41.03billion in 2011, and Shs36.3billion in 2010.
On the other hand, LAC’s gross underwritten premiums stood at Shs35.2billion in 2015, up from Shs23.7billion in 2014 and Shs19.1billon in 2013. In 2012, Lion Assurance earned Shs17.18billion, up from Shs14.5billion in 2011 and Shs11.55billion in 2010.
While AIG has blamed its woes on tough economic times both locally and globally, it appears LAC has been able to leverage its position a part of the Zimbabwe-based investment holding company, TA Holding Company (TA), which is in turn owned by Masawara; a public limited company incorporated in Jersey and listed on the London Stock Exchange with about US$300 million in assets according to the latest June 2016 figures. Lion Assurance has operations in Botswana and Zimbabwe.
According to latest figures, LAC had registered a 16% decline in profits by June 2016 after it notched a profit of US$562,000 down from 753,000 by June 2015.
Its biggest challenge has been market penetration which it hopes to achieve by taking over the AIG assets. No figures are being mentioned as regards the consideration for the deal, but LAC might have paid something substantial for the new business.
The takeover will see LAC acquire 42 out of the 48 AIG insurance agents; increasing LAC’s network of agents to 102.
LAC Managing Director Newton Jazire told The Independent on Nov. 05 that the take-over is expected to boost the firm’s businesses in Uganda almost immediately.
“All AIG agents used to contribute 50% of the company’s gross underwritten premiums annually. And we believe that they will boost our growth,” Jazire said.
He said the new agents are very organised, professional, and experienced; having been in the industry for a long time.