South African company, Momentum Metropolitan Holdings, has exited the Nigerian market by selling off its subsidiary in Nigeria as the National Insurance Commission (NAICOM) begin its shake-up process by downsizing the number of players in the Nigerian insurance market.
Momentum Metropolitan Holdings sold its 100% stake in Metropolitan Life Nigeria to Verod Capital Management, an investment firm based in Nigeria. This deal comes three years after Momentum Metropolitan acquired the 50% stake of United Bank for Africa to become majority stakeholder.
While it was stated that the exit of Momentum Metropolitan Holdings was due to its Reset and Grow strategy, there is also the recapitalization issue of NAICOM.
Why the sell-off? The acquisition occurred after NAICOM proposed an increment of the capital base for insurance firms. The regulator directed Life insurance underwriting firms to grow their capital base from N2 billion to N8 billion.
Before Momentum Metropolitan Holdings sold its shares, Metropolitan Life Nigeria accounted for about N2 billion capital base. Metropolitan Life Nigeria is a life insurance firm. Its full-year 2018 financial statement disclosed the company ended with N2.26 billion gross premium written from just N2 billion in 2017. The deal will enable Metropolitan Life Nigeria to meet the NAICOM requirement.
This is the second recapitalization process Metropolitan Life Nigeria will undergo, as the company had made a change of name from HEIRS Life Assurance Company Limited after a successful recapitalization about three years ago.
Mergers&Acquisition is expected to disrupt the insurance market’s status quo as the number of insurance companies have been projected to drop from 59 companies to about 25 just like the banking industry in 2004 after the Charles Soludo banking reform which positioned Nigerian banks on global competitive platform.
Why this is important: Mergers and Acquisitions of insurance companies is expected to strengthen the insurance market in Nigeria and accelerate its growth to make the sector as competitive as other countries.
Currently, the insurance penetration in Nigeria is 0.31% a rather extremely low rate compared to South Africa, India and other developing countries. But with this reorganization of the Nigerian insurance market, Coronation Research projects that insurance penetration in Nigeria could grow from 0.31% to 3.69% in 10-years.
What Verod see in such market? For Verod Capital Management, opportunities abound amidst slow growth of Nigeria’s insurance market, “Low levels of insurance penetration, even compared to other African economies, point to untapped opportunities within the sector,” Eric Idiahi a Partner at Verod said.
He added that NAICOM has taken necessary steps to create an enabling environment suited for the growth of the insurance market, “We believe that these actions, in addition to product innovation supported by increased public awareness and investments in technology-driven distribution channels, are the triggers that this sector needs to close the insurance penetration gap.” Idiahi concluded.
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Note: Verod Capital Management own a “minority” stake in Greensprings, one of Nigeria’s leading private schools. The investment company also have a key stake in Cscs Plc.
Verod also has an interest in Niyya Farm Group Limited, a holding company of an agro-processing business, among many other businesses.