BK Group moves to acquire Sonarwa

BK Group has been ‘shopping’ for one or more private insurance companies in the country in its quest to expand the lender’s insurance portfolio, under BK Insurance.
Sonarwa headquarters in Kigali. / Courtesy

BK Group has opened talks with the shareholders of National Insurance Company (Sonarwa), the country’s oldest insurance firm, in a bid to acquire it.

Rwanda Social Security Board (RSSB) is the largest shareholder of the firm which has been running for 43 years.

RSSB has a shareholding of up to 100 per cent shares in Sonarwa Life and 79.46 per cent in Sonarwa General.

The development was confirmed on Thursday by BK Group Chief Executive Officer Dr. Diane Karusisi, who said they have since opened negotiations and hope to close the deal in the course of the year.

BK Group has been ‘shopping’ for one or more private insurance companies in the country in its quest to expand the lender’s insurance portfolio, under BK Insurance.

This is at a time when insurance players in the country are consolidating and merging in a bid to raise capital under the minimum capital requirements for operators.

Under the new regime, general insurers are expected to raise Rwf3 billion while life insurance firms are expected to have a minimum capital of Rwf2 billion, up from Rwf1 billion.

General Insurers have a transition period of 3 years to raise the capital while life insurance firms have two years.

In a previous interview with The New Times, officials of the bank had said that among the items on their checklist is the growth opportunity the acquired firm represents, risk factors, relationship of the firm with its current clients, brand, among other aspects.

The local market is set to see more acquisitions and mergers to end persistent challenges in the sector such as capital shortage, inefficiency in operations, lack of trust and proper branding.

For years, Rwandan insurance sector have been making losses in underwriting and is only profitable due to investments in aspects such as real estate, equities and government securities.

Underwriting losses in the industry stood at about Rwf4.2 billion as of December 2018 with motor vehicle insurance accounting for about Rwf1.5 billion, according to central bank data.

Sonarwa was created by the Government of Rwanda in 1975.

In 2011, the insurance company established two business lines, namely Sonarwa General Assurance and Sonarwa Life Insurance, to comply with the regulator (Central Bank)’s directives.

BK Group Q1 performance

Meanwhile, BK Group in the first quarter of 2019 registered an after tax profit of Rwf 7.5 billion (US$ 8.3 million) largely driven by good performance by the banking and insurance subsidiaries.

Bank of Kigali’s loan book expanded by 6.9 per cent in the quarter to Rwf  641.9b while retail clients’ balances and deposits grew to Rwf 153.1 billion as at 31 March 2019.

The bank also launched a IKOFI wallet; a universal digital financial solution whereby Rwandan farmers and agro-dealers are able to register using their identity cards or business certificated to start transacting with e-money and giving them the opportunity to create a Digital footprint.

IKOFI has over 1,000 registered agro-dealers/agents and over 50,000 registered farmers.

BK insurance registered a profit of Rwf 690m in the first quarter compared to Rwf 79 M registered in same period last year.

BK Insurance in 2018 recorded an after tax profit of Rwf884.3 million up from about Rwf300 million in the previous year. The arm is projecting profits of about Rwf1.2 billion this year.

Commenting on the profits, Karusisi said that they had experienced a positive growth in the quarter attributing it to innovation and customer centric products.

“We attribute this growth to innovative products we continue to rollout; and one of those new products is an unsecured personal loan of up to Rwf 30 million that our clients receive.

“BK Group Plc also reduced the operating costs by 9.7 per cent (y-o-y) due to improved efficiency in our operations as we continue to digitize many of our processes. This first quarter performance gives us great confidence and optimism about the entire year 2019,” she said.