BK Group mulls acquisition to expand its insurance portfolio

Bank of Kigali’s Board Chairman Marc Holtzman speaking during the BK Group’s Annual General Meeting yesterday. Courtesy.

BK Group could in the coming days acquire one or more private insurance companies in the country in its quest to expand the lender’s insurance portfolio under BK Insurance.

The Group is in talks with a number of insurance firms in the country which could see the acquisition of one or more insurance firms.

The development was confirmed by the Group’s Chief Executive Officer Dr Diane Karusisi on the sidelines of the Group’s Annual General Meeting yesterday.

Karusisi, however, said that the Group is not seeking to acquire a local bank as had been speculated.

BK Insurance is one of the four subsidiaries of BK Group which made an after tax profit of Rwf27.4 billion (about $30.7 million) in 2018.

The insurance firm debuted on the local scene in 2017 and has about 14 per cent market share as of December 2018.

Karusisi said that they are looking at a number of options in the local market but were yet to close in on any at the moment.

Acquiring a player in the local market, she said, is the right thing to do to grow their market share and probably go beyond general insurance to health insurance.

“We are looking at a number of options; we believe it’s the right thing to do because we want to have a sizable market share. Beyond that we have been doing general insurance and looking at options available,” she said.

Among the items on their Group’s checklist is the growth opportunity the acquired firm represents, risk factors, relationship of the firm with its current clients, brand, among other aspects.

In a recent Interview with BK General Insurance Chief Executive, Alex Bahizi, said that mergers and acquisition in the insurance sector are ideal at the moment as firms seek to expand scope, scale, technology and capacity among other aspects.

“If you look at the trend, size of insurable assets in Rwanda, mergers and acquisition are key in terms of growing scope, scale, technology, strength, capacity,” he said.

Acquisitions and mergers are also expected to end persistent challenges in the sector such as capital shortage, inefficiency in operations, lack of trust and proper branding.

He said that, among the key aspects to look out for when acquiring an insurance firm is its brand, royal customers the buyer will inherit and impact on buyer’s portfolio among others.

BK Insurance 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.

The insurance sector bears much potential considering that it’s one of the least developed sectors in the country.  At the moment, there is less than 4 per cent insurance penetration despite the growth of insurable assets in the recent past.

Among the reasons for low penetration include little innovation and lack of ideal business models.

At the moment, Rwandan insurance sector makes 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.

There is likely to be several mergers and acquisitions in coming days following a decision by the Central Bank to raise the minimum capital requirements for insurance firms – the amount of money insurers are required to hold with the central bank.

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.

Already, Sanlam Group has taken over Soras Assurance General Ltd and Saham Assurance Rwanda Ltd following an acquisition of the two companies. Phoenix Insurance is now the MUA group after acquisition of majority shares in 2018.

BK Group AGM

The Annual General Meeting held yesterday approved a dividend pay-out of Rwf12.2 per share of 40 per cent of profits, about Rwf10.9 billion.

The general assembly also a dividend reinvestment plan at 5 per cent discount share price for shareholders seeking to use their dividend to invest further in the firm.

The meeting also approved directors’ remuneration of Rwf398M as well as appointment of new directors to the group.