• Thursday, March 28, 2024
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AFIG Fund II in NEM raises foreign control of Nigeria’s insurance industry

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The acquisition of 29.9 percent stake in NEM Insurance Plc by Advanced Finance and Investment Group (AFIG Funds), has further increased the amount of foreign ownership in the nation’s insurance industry. AFIG Funds, according to the notice sent to the Nigerian Stock Exchange, is a leading private equity fund manager, and with this transaction, has become the largest shareholders in NEM, which according to the notice signifies the beginning of a strategic partnership between AFIG Funds and NEM which is currently embarking on its next growth phase as a top tier player within the Nigerian Insurance Industry.

“We are delighted to welcome AFIG Funds as a significant shareholder in NEM at such an exciting time in the company’s evolution. This partnership with AFIG Funds is the outcome of several years of constructive engagement, as well as a thorough internal strategic process to indentify and engage with the best long term institutional partner for our company. We look forward to continue to benefit from AFIG Funds’ extensive experience investing in strong African companies particularly in financial institutions.

“We believe this partnership will accelerate the realisation of our growth ambitions within Nigeria and across the continent. We are confident this will be a fruitful and mutually rewarding partnership”, Tope Smart, NEM group managing director said.

“Foreign investors are looking into the nation’s insurance industry now because valuation is very cheap, the companies being targeted have growth potential and a lot of opportunities are not yet tapped in Nigeria’s insurance industry”, said Ahmad Jinad, insurance analyst with Meristem Securities.

The AFIG-NEM deal joined other successful deals executed in the insurance industry in Nigeria. According to the Nigerian Insurance Commission (NAICOM), there were 12 deals executed by foreign investors in from 2014 to 2016. In one of the deals, Insurance Resourcery Consultancy Services Limited (IRCSL) took control of a majority stake in Great Nigerian Insurance Plc. Also, Sunu Assurances took control of a majority stake in Equity Assurance, thus leading to the formation of Sunu Assurance in Nigeria.

Other notable foreign brands that have acquired majority stakes in Nigerian insurance firms include SA Holdings, Old Mutual, Samlam Group SA, New India Assurance Company, AXA SA and Allianz.

NEM Insurance is one of the first tier insurance firms in Nigeria that have consistently delivered value to all the stakeholders in the forms of dividend payment and consistent price appreciation. In full year 2018, the share price on NEM closed at N2.70, representing 62.7 percent price appreciation in 2018. This is one of the inspirations to the managements of both AFIG Funds and NEM following the successful deal.

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“We are excited about our partnership with NEM Insurance and the company’s strong growth prospects. NEM is one of the fastest growing, best capitalised and most consistently profitable underwriters in Nigeria. Our decision to invest in NEM during an election year in Nigeria, which is a time when foreign investors tend to shy away from emerging markets, is testament to our strong belief in the prospect of the company and the resilience of the broader economy. we are keen to begin working with management , board of directors, and other shareholders to execute on the many promising initiatives to further unlock the company’s significant potential”, Papa Madiaw Ndiaye, CEO AFIG Funds said.

“Through our engagement with NEM over the last several years, we have had the opportunity to observe it sold trajectory, and to develop confidence in the management team’s ability to seize growth opportunities in the increasingly competitive landscape”, Kelechi Okoro, director of investments at AFIG added.

The Emerging Markets Private Equity Association(EMPEA) in 2017 had predicted that the African insurance industry would witness a wave of mergers and acquisitions which would allow African insurance firms to have access to more capital.

“We expect there will be increased interest amongst non-strategic investors for African insurance companies. Some of the advantages accessible to non-strategic investors include a greater access to capital (there were 145 PE deals reported in Africa in 2016, amounting to US$3.8bn, versus US$2.5bn in 2015), and the ability to retain and incentivise management through attractive equity arrangements.

“Because of the challenges involved in the integration of new acquisitions into a multinational group structure from a legal, compliance, governance, reporting and parent policy compliance, a private equity firm can add value to an African target by conforming a target’s compliance policies and procedures to regulatory requirements that are applicable to the private equity investor. This will also help smooth an exit sale to a strategic company”, EMPEA had said in its Legal and Regulatory Bulletin, Fall 2017.

 

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