Big insurance happenings in Africa
The African life and non-life insurance landscape is in for a shake-up following a Joint Venture (JV) announcement by two leading multinational insurance brands. In a media release issued 4 May 2022, Allianz SE and Sanlam announced they would enter into a JV to create a premier pan-African non-banking financial services entity operating in 29 countries across the continent.
Top three ranking in many countries
The transaction is still subject to a number of suspensive conditions and it could be 12-15 moths before the proposed JV company is fully bedded down. What is clear from Sanlam’s JSE SENS message announcing the transaction is that Africa’s financial and risk advice practices and consumers will soon be able to transact with an insurance- and investment-focused JV company with an estimated Group Equity Value (GEV) of ZAR33 billion. Furthermore, this company will rank among the top three players in the majority of the 29 countries it proposes to operate in.
There is plenty of useful information in the SENS message, which was released 4 May 2022 under the headline ‘Creation of a pan-African Joint Venture between Sanlam and Allianz SE’. The JV was described as a “definitive agreement in respect of a long-term strategic JV arrangement regarding Santam’s operations on the African continent, outside of South Africa”. Ironically, this excluding South Africa is commonplace when referring to financial services deal making on the continent: as if our market exists and operates in a bubble separated from the rest of Africa.
The guts of a R33 billion insurance outfit
It was interesting to unpack the assets that each of the multinational insurers had agreed to bring to the party. Per the SENS, the JV company will include the African assets in the Sanlam Emerging Markets (SEM) portfolio, excluding investments in South Africa, Continental Re and SEM’s Namibian subsidiaries. As such, Sanlam will chip in its 90% shareholding in SAN JV.
Allianz will contribute its African assets which include minority stakes in African Reinsurance Corporation (ARC) and its shareholding in Jubilee’s general insurance businesses in Kenya, Uganda and Burundi. It has also chipped in the remaining 10% shareholding in SAN JV, which it purchased from Santam for R2 billion. Santam, as FAnews readers will know, is a non-life insurance subsidiary of Sanlam. Sanlam will reportedly hold a controlling interest in the JV, with an initial shareholding split of 60:40 in its favour, and Allianz will have the option to increase its shareholding to a maximum of 49% over time. Both firms have committed to the deal for a minimum of 10 years.
Sanlam Group CEO, Paul Hanratty was full of praise for the deal. “In line with Sanlam’s stated ambition to be a leading pan-African financial services group, the proposed joint venture will enable us to take a significant step towards realising that ambition,” he said, in the official release announcing the transaction. “[The JV] will also strengthen our leadership position in multiple key markets that are core to our Africa strategy, building quality and scale where it matters; we are delighted to have Allianz as partners and believe their expertise and financial strength will add tremendous value to our businesses”.
Why this Africa-focused deal matters
The Sanlam JSE SENS shared some of the group’s motivations for the JV, including that “the proposed transaction would enable [the group] to enhance [its] capabilities in existing markets and expand [its] footprint and market leading positions in certain key jurisdictions on the African continent”. Other strategic benefits listed in the SENS include:
- Enabling a strategic partnership with one of the largest financial services groups and insurers in the world, leveraging Allianz’s broad expertise and capabilities.
- Accelerating Sanlam’s expansion into high priority countries, further strengthening Sanlam’s position in markets core to Sanlam’s African strategy and optimizing the existing pan-African portfolio.
- Developing Sanlam’s innovative existing strategic partnerships and enhancing Sanlam’s digitally enabled distribution network across a best-in-class product offering.
- Maintaining disciplined capital allocation, maximising value creation for both Allianz and Sanlam and their respective stakeholders.
- Jointly with Allianz, benefiting from knowledge sharing, economies of scale, a combined platform as well as potential synergies for the JV and Sanlam.
Growing in an important region
The transaction will no doubt contribute to Sanlam’s goal of growing its Africa-wide customer base. Per the firm’s Integrated Report 2021, it plans to position the business “to create opportunities for 50 million customers across Africa to access financial solutions through multiple platforms” by 2025. If we assume a 15 month window before the abovementioned JV company is fully established, then it should be firing on all cylinder before this deadline.
We leave the final word in today’s newsletter to Christopher Townsend, Member of the Board of Management of Allianz SE, commenting in the insurer’s media release on the transaction. “In accordance with our enterprise strategy to expand our leadership position through scale and new partnership models, Allianz is pleased to accelerate its growth in this important region through a partnership with the undisputed market leader,” he said. “Sanlam’s capabilities extend our local reach and market penetration, and the joint venture allows us to establish leading positions in key growth markets”.
Writer’s thoughts:
South Africa has a long track record of topping Africa’s life insurance penetration tables, and also dominates the non-life sector due to the country’s higher gross written premiums (GWPs). As such, the value of a multinational firm’s SA-focused activities often dwarf those of its Africa ex-SA operations. Are you surprised that Africa-focused financial services brands still view the South African insurance market separate to the rest of Africa? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts editor@fanews.co.za.
