Barclays acquires controlling stake in First Assurance

Barclays Africa is set to acquire a controlling stake in Kenyan insurance firm First Assurance in a move likely to raise the stakes in the country’s insurance industry. Barclays Africa yesterday announced that it has reached an agreement to acquire 63.3 per cent of First Assurance in a deal valued at Sh2.8 billion including a Sh722 million capital injection.

The deal is subject to regulatory approvals in South Africa, Kenya and Tanzania at which point Barclays Bank Kenya will start offering general and life insurance services and products in Kenya and Tanzania.

“Barclays Africa wants to extend its customer offering to more people across the continent while expanding the range of financial products and services on offer,” said Mr Lanz Zulu, Barclays Africa’s Managing Executive for Africa at Wealth, Investment Management and Insurance.

In January 2013, the Central Bank of Kenya (CBK) amended the legislation through the issuance of the Prudential Guideline on Incidental Activities allowing insurance companies to use commercial banks as agents to sell and distribute insurance products. According to the CBK, the legislation allows banks to only act as a distribution channel for the provision of insurance products but not to undertake or engage in the actual business of underwriting of risks.

By acquiring a controlling stake in a local insurance company, Barclays has augmented its insurance business, Barclays Life Assurance Kenya (BLAK) which it launched two months ago.

“The planned acquisition of First Assurance is a good strategic fit for our business, provides us with a strong platform to expand our bancassurance offering in East Africa, and complements the Group’s financial target of increasing our revenues from Africa outside of South Africa to between 20 per cent and 25% per cent,” said Mr Zulu.

First Assurance is the 10th largest general insurer in Kenya and also offers general insurance in Tanzania and life insurance in Kenya. In 2014, the insurer reported a Sh518 million in profit after tax and total equity of Sh2.1 billion.

First Assurance Managing Director Stephen Githiga said that the acquisition would provide their customers with a revamped access to new products and services.

“As a majority shareholder, Barclays Africa will provide fresh capital, technical support, a vast distribution network and a strong brand for us to leverage on,” said Githiga.

The move by Barclays opens a new front for competition in the country’s growing financial services sector particularly among the top-tier commercial banks.