Abraaj Buys into Morocco Insurer

Posted on Mar 09, 2012 by Sergio Ulloa (G+)

While the eyes of the international insurance industry have largely been drawn on the sale of HSBC's general insurance business in Latin America and Asia to AXA and QBE over the past week, moves have also been made in the Middle East and North African insurance markets that are worthy of attention. It was announced on Wednesday that Abraaj Capital, a Dubai-based private equity firm, would make a significant investment through available company funds in Saham Finances, a Moroccan insurance holding company with a significant presence across Francophone West Africa. The investment, with a reported transaction size of US$125 million, is intended to support the continued growth of Saham Finances, with a particular focus on extending coverage across more of the African continent, where insurance penetration rates have remained low. Saham Finances currently hold majority stakes in three notable insurance subsidiaries: Colina Group, Isaaf and CNIA-SAADA. All three companies have strong positions in the insurance markets in which they are active. Saham Finances initially bought CNIA SAADA in 2005 and later took control of Colina Group in November 2010. According to industry analysis, CNIA SAADA is the second largest general insurance company in Morocco with approximately 16.2 percent of the market, and is publicly listed on the Casablanca Stock Exchange. Colina Group currently ranks second in life and general insurance business in 11 countries that fall under CIMA (the Inter-African Insurance Association) with an estimated 11 percent share of the market. Specialist insurer Isaaf meanwhile comes second in the assistance services market in Morocco with around 46 percent of the market share. Combined, Saham Finances is believed to have over 5 million policyholders at present, providing a wide variety of life and non-life insurance options across Morocco and 10 other African countries. Abraaj Capital has become the Middle East's largest private equity firm focused on emerging market development. Since it's founding in 2002, the group have gone on to raise more than US$7 billion in fresh capital. Abraaj Capital now hold stakes in several prominent regional companies, including Egyptian contractor Orascom Construction, supermarket group Spinneys, budget airliner Air Arabia, Turkey's largest private hospital chain Acibadem Healthcare Group, and education chain GEMS. Overall the group has a stake in some 35 companies across the Middle East and North Africa region at present. With the recent acquisition of rival emerging markets firm Aureos Capital, pending regulatory approval, Abraaj Capital could soon become a truly global private equity firm with US$ 7.5 billion in assets under management across 30 countries. At the signing ceremony between the two firms in Casablanca, Morocco this week, Matteo Stefanel, Senior Partner at Abraaj Capital, explained that their move into the regional insurance trade with Saham would test their ability to handle yet another emerging business segment. "Our investment in Saham Finances is in line with our focus on supporting strong companies active in high-impact sectors in rapidly growing economies. As a leader in the insurance sector in Morocco and Francophone West Africa, we see tremendous growth opportunities for Saham Finances," Stefanel stated, adding that the high standards demanded by both firms would surely result in business success going forward. "The company has one of the best management teams in the sector and a history of successful acquisitions and integrations. At this inflexion point in its growth journey, we are truly delighted to enter into this partnership with Saham Finances," Stefanel remarked. The Abraaj Capital investment will instantly bolster Saham's capital levels, allowing the company to fund an ambitious growth and development plan through strategic insurance acquisitions in high growth markets across Africa and the Middle East. Saham Finances' assorted subsidiaries currently operate in two regions of the world with the lowest rates of insurance penetration and awareness globally. Furthermore, their subsidiary Colina is active West and Central Africa countries which lag significantly behind the rest of the porous Sub-Saharan region as well. The Abraaj Capital investment will enable Saham to quickly consolidate its 2010 acquisition of Colina and leverage synergies between it and their most successful operation CNIA-SAADA. Injecting fresh growth capital into Colina, will furthermore enable the company to expand its life and non-life insurance operation into Southern and Eastern Africa through targeted acquisitions. These are countries that are markedly under-penetrated and will require a considerable commitment of time and resources for insurance momentum to take hold. Back in Saham Finances' home market meanwhile, Abraaj Capital's outlay will help the insurer meet the expected rising demand for insurance products and services in Morocco resulting from the government's 2011-2015 program contract, a public-private partnership intended to drive up domestic insurance participation rates. In addition to funding, as per the terms of the business partnership, Abraaj Capital have agreed to lend its management and investment expertise to Saham Finances and its insurance subsidiaries, and will also make room for their representatives on their board of directors. Saham Finances' Founder and Chairman, Moulay Hafid Elalamy was appreciative of Abraaj Capital's involvement, stating in closing that Africa's insurance sector will look to benefit as a result of their funding commitment. "The African insurance sector represents an extremely attractive investment opportunity. As Saham Finances increases its geographic footprint, we will further contribute to the continent's continued economic development through the provision of sophisticated life and non-life insurance products for individuals and companies," Chairman Elalamy finished. While much international insurance attention has been placed on the lucrative Asia Pacific and Gulf regions, Africa could present an attractive business opportunity for multinational companies over the longer term as well. Overall market penetration for insurance products in the region remains very low and many standard coverage services remain untapped on the market, including most life, health, property and many savings-related insurance options. The insurance premiums collected in Africa only represent two percent of total world premiums at present, and the contribution of the domestic insurance sector towards the GDP of the region remains small by international standards. This of course demonstrates that insurance products are not yet being used effectively as a vehicle for greater protection and savings in these countries. As Africa's economies continue to grow, urbanize and further open their markets, demand for healthcare and insurance services will only increase. Companies Mentioned Abraaj Capital: The Abraaj Capital Group is the largest private equity manager in the Middle East. Founded in 2002, the group has over US$ 6 billion in assets under management. Abraaj Capital, with headquarters in Dubai, has helped accelerate the development of over 50 companies in the Gulf and Middle East region, in fields such as healthcare, education, energy and logistics. Saham Finances Saham Finances is the insurance division of the Saham Group. The company offers a wide array of insurance products through it's many subsidiaries, including both life and general insurance in various countries. Due to the pure size and marked cultural differences inherent to the African continent, Saham Finances is broken down into 4 distinct geographic regions: North Africa, West Africa, Central Africa and Southern Africa.