Leapfrog to buy second insurance firm from Sh35b war chest

Private equity firm LeapFrog Investments is scouting for a life insurance firm in Kenya after it received a Sh35 billion war chest from an American company.

The firm, which holds a controlling stake in Resolution Health Insurance, said it will be looking at expanding its portfolio in the insurance sector, and has narrowed down to the life insurance sector.

“We will look at different players and we plan to have discussions with almost everybody. We are yet to determine the amount to invest,” said Mr Doug Lacey, Partner at LeapFrog. The firm announced on Friday that it had entered into a $350 million (Sh35.9 billion) investment partnership with Prudential Financial, Inc. (PFI) to access high-growth markets in Africa.

Under the partnership, Prudential Financial will provide the funding while LeapFrog will manage the projects. “The new investment vehicle will target investments in life insurance companies in Kenya and other leading economies, including Ghana and Nigeria, to be made over a three- to five-year period,” Mr Lacey said.

He added that there is still no specific amounts to be allocated to each of the countries, but said Kenya has been identified for the low penetration of life insurance.

“Kenya has a good population and the penetration for life insurance is just about 1 per cent, which is quite high by African standards but still low by emerging market standards. Kenya also has good skills,” he said, adding that the existence of mobile money has enabled more people to connect and this will allow it to reach more people.

“We are delighted to partner with LeapFrog Investments, given their deep experience in Africa, and their impressive record of success as insurance investors focused on emerging consumers,” Mr Charles Lowrey, executive vice president and chief operating officer of PFI’s International Businesses said. PFI is an investor in LeapFrog’s most recent private equity fund. LeapFrog bought majority stake in Resolution Insurance, supporting the expansion of the firm’s health and general insurance lines and distribution network across East Africa and is counting on this success to pull another second buy.

LeapFrog has also invested in insurance companies in Nigeria, Ghana and South Africa. It also bought Apollo Investments Ltd in 2011 and sold it before buying into Resolution Health. Leapfrog, however, maintained that there will be no conflict of interest given that Resolution Health East Africa is in a different line of business. This comes months after ratings agency Fitch said Kenyan insurance firms are prime targets for acquisitions.