Foreign investor to stake $23m in underwriting deal

South Africa’s Liberty Holdings Company, has revealed plans to acquire a 75 per cent stake in a Nigerian long-term insurer for 160 million rand ($12 million), the company said, after reporting a 38 per cent decline in earnings, The Guardian has learnt.

This development would further enlarge foreign domination of the nation’s insurance sector, while the quest for growth and development of insurance portfolios heightened.

Liberty has been expanding beyond its home base to other parts of Africa, where a growing middle class is driving demand. Part of Liberty’s strategy is to grow its presence in West Africa through the long-term insurance business and by entering the asset management business.

“We see Nigeria as a market of the future,” said Liberty Chief Executive, Thabo Dloti, but declined to give further details about the Nigerian insurer.

Dloti said: “It may be having difficulties now, but everything indicates to us that in the long term, Nigeria is going to be a big contributor of growth if you are doing business in Sub-Saharan Africa.”

Liberty, South Africa’s fourth biggest insurance firm by market value already has a presence in Nigeria through Total Health Trust, after buying the remaining shares for 142 million rand in August 2015.

In 2016, it concluded three short-term insurance acquisitions in Uganda, Malawi and Botswana and received its licence in Lesotho to operate a life and health business.

Liberty, majority owned by South African lender, Standard Bank, reported a 38 per cent fall to 904.5 cents in normalised headline earnings per share, for the year ended December 31st, due to increased pressure on consumers and lower returns from investment markets.

Shares were down 1.80 per cent to 111.46 rand at 0806 GMT. Net customer cash inflow, or the difference between money received from customers and money given back, fell 49 per cent to 7.7 billion rand.

Earnings in its Africa insurance business were 41 million rand, while earnings from the group’s South African retail operations were down 40.1 per cent, the firm said.

However, the Nigerian Insurers Association (NIA), the umbrella body of all insurance firms across Nigeria, described it as a welcome development.
The Head Corporate Affairs and Human Resource Manager, Davis Iyasere, NIA in a chart with The Guardian said: “It is a welcome development for the sector and it is also in the interest of the NIA to see investors coming into the industry with opportunities that would unlock its growth potential.”

The Head of Corporate Affairs, National Insurance commission (NAICOM), Rasaaq Salami, said the commission is aware of the investor’s plan, “but I want to believe they are coming with robust opportunities that would turn the industry around for better.”

Liberty declared a gross final dividend of 415 cents per share. “Operating conditions are expected to remain tough and the pressure on consumer disposable income is likely to continue in the short term,” Liberty said in a statement.