Title: Prudential moves into insurance in Ghana
Prudential is to begin selling insurance in Africa for the first time after agreeing to purchase a Ghanaian group that provides protection to individuals who live on less than $2.50 a day.
The FTSE 100 insurer is buying Express Life from LeapFrog Investments, a specialist “microfinance” fund set up with backing from institutions including JPMorgan and the European Investment Bank, and Obed Danquah, its founder.
Although relatively small – people familiar with the matter said the Pru was investing a sum in the low double-digit millions – the deal is symbolically significant for the UK’s biggest insurer by market capitalisation.
The Pru, which has enjoyed strong returns from its substantial expansion in southeast Asia over the past decade, has so far avoided Africa apart from a holding in a South African asset management operation.
However, in recent months Tidjane Thiam, the Pru’s chief executive, who was born in Ivory Coast, has been talking up the economic prospects of the continent and its expanding middle class.
“I am happy to go on the record and say that the 22nd century will be the African century.”
Even so, insiders have downplayed the prospect of an aggressive assault on Africa by the Pru. The group is eyeing expansion into the continent but is also looking at other markets, including Latin America.
Premiums written in sub-Saharan Africa, excluding South Africa, account for only 0.2 per cent of the global insurance industry total, according to data from Swiss Re. The take-up of life insurance across the continent by individuals is particularly low.
The markets across the continent are diverse. Barriers to further development of the industry include poor infrastructure and governance problems.
In Ghana, life insurers wrote an estimated $171m in 2011. This accounts for only about 0.5 per cent of the country’s gross domestic product.
Express Life has about 16,000 policies, according to the Pru. About nine in 10 customers live on less than $10 a day and about a fifth on less than $2.50.
They pay premiums of as little as 70c a month for Express Life’s offerings, which are often sold via mobile phones and which include health and life insurance, funeral cover and savings products.
The Pru is the first exit for Leapfrog Investments’ debut $135m fund, which invested in seven companies in emerging markets.
Other European insurers are also looking at expanding in Africa to capitalise on economic growth.
Separately on Thursday, Old Mutual – which has set aside $550m to fund acquisitions in sub-Saharan Africa – said it had received approval from regulators for its purchase of a majority stake in Faulu Kenya.
Do read the latest news concerning Prudential in Ghana via: http://www.ft.com/cms/s/0/05d7c448-5752-11e3-9624-00144feabdc0.html#axzz2ofZ1vsSe
"This month, the Pru agreed to purchase Express Life of Ghana. The deal appears tiny in Prudential’s terms. The UK insurer produces annual operating profits of more than £2.5bn." FT
"Yet it would be a mistake to think insurers are concentrating their efforts on the “middle class”. Nine out of ten of the customers of the Ghanaian insurer that Prudential is buying earn less than $10 a day. A fifth live on less than $2.50 a day." FT
Paulina says: I wonder what "spending a sum in the low double-digit millions to acquire the Ghanaian business" -means -don't you???