NCBA’s quest to own its own insurance unit comes against the backdrop of interest by lenders to offer insurance products.
US-based finance and insurance corporation American Insurance Group (AIG) is set to earn at least Ksh2 billion ($13.5 million) from the disposal of its majority shareholding in AIG Kenya Insurance to NCBA Group.
AIG is the only other shareholder in AIG Kenya Insurance, holding a stake of 66.67 percent as at the end of last year, according to disclosures by the multinational.
The value of the majority stake was estimated at Ksh2 billion at the end of December 2022 based on NCBA’s valuation of its existing 33.33 percent ownership in the local insurer at Ksh1.028 billion ($6.96 million).
On Monday, NCBA Group disclosed its initiation of discussions with AIG Group to take 100 percent of the issued share capital of the subsidiary for an undisclosed sum.
AIG Kenya Insurance Company Limited is the fourth subsidiary of AIG Group on the continent after Egypt’s AIG Egypt Insurance Company S.A.E and South Africa’s Johannesburg Insurance Holdings, AIG Life South Africa and AIG South Africa Limited. NCBA has held a minority stake in the associate company for the past 18 years.
The unit has operated in Kenya since 1972 and closed the year to December 2022 with Ksh3.62 billion ($24.51 million) gross written premiums, translating to a 2.14 percent market share of Kenya’s general insurance industry.
AIG Kenya features multinationals, large Kenyan businesses, small and mid-sized enterprises and individuals. NCBA is eyeing the acquisition to grow the portfolio of financial products offered to its primarily banking clientele.
“Insurance is increasingly becoming a basic financial need for the type of customer that NCBA serves. We believe that by bringing together NCBA’s physical and digital distribution platforms and AIG Kenya’s insurance capabilities, we will accelerate towards our ambition to become a universal bank that addresses a full set of our customers’ financial needs,” said NCBA managing director John Gachora.
Discussions between the pair will be subject to conditions including regulatory approvals from the Central Bank of Kenya, the Insurance Regulatory Authority, the Competition Authority of Kenya and the Capital Markets Authority.
On Tuesday, NCBA issued a statement advising investors to be cautious when dealing in the Group’s securities.
NCBA’s quest to own its own insurance unit comes against the backdrop of interest by banks and microfinance banks to offer insurance products or bancassurance.
In March, the number of banks and microfinance banks offering insurance products nearly tripled to 21 from eight in August 2022 on increased regulatory compliance.
NCBA is licensed as a bancassurance intermediary while banks such as Equity and Absa Kenya have established in-house insurance units.
Other top banks on the scene include KCB, Co-operative Bank, DTB, I&M, Stanbic and StanChart.