In July 2024, the NCBA Group acquired insurance firm AIG Kenya in a fete that is set to change the insurance landscape in Kenya. The NCBA Group acquired AIG Kenya from the US-based finance and insurance corporation American Insurance Group (AIG) in a buyout transaction that was estimated at Sh. 2 billion.
This acquisition comes in at a time when the local banking sector is embracing insurance as a secondary income stream. It also sees NCBA, which has been running a bancassurance intermediary, start running its own fully-fledged insurance business.
“Insurance is increasingly becoming a basic financial need for the type of customer that NCBA serves,” says NCBA Group chief executive officer John Gachora.
Gachora’s sentiments are echoed by Ephantus Ngunjiri, a financial markets analyst. According to Ngunjiri, the acquisition of AIG is not only going to be an additional revenue stream, but also a boon for NCBA Group’s growth as a mainstream financial services provider in the country.
“I see the acquisition as being very strategic and a safe bet at the same time. This is an insurance business that NCBA Group has been a part of as a minority shareholder for close to two decades. Its acquisition means the group has learned the ropes and is ready to roll out its wide network to push up AIG’s stake in the local insurance sector,” he says, noting that AIG Kenya has been operating in the country since 1972. In the financial year 2023, it closed with Sh. 3.62 billion gross written premiums.
The American Insurance Group has been holding a 66.67 per cent stake in AIG Kenya, with the NCBA Group holding a stake of 33.33 per cent as at financial year ended December 2023. In the same vein, the NCBA’s investment increased from Sh. 987.3 million in the financial year ended December 2022 to Sh. 1.03 billion in the financial year ended December 2023.
“We believe that by bringing together NCBA’s physical and digital distribution platforms and AIG Kenya’s insurance capabilities, we will accelerate towards our ambition to become a universal bank that addresses a full set of our customers’ financial needs,” says Gachora.
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According to the NCBA chief, the bank has held a minority shareholding in AIG Kenya for over 18 years and this strategic move brings into NCBA an over 50-year-old insurance business, with a heralded market reputation for offering a sophisticated general insurance proposition to Corporates, SMEs, and individuals.
“This acquisition will enable our customers to conveniently access all their financial products under one roof. With insurance increasingly becoming a basic financial need for the type of customers we serve, an ecosystem of NCBA’s physical and digital distribution platforms and AIG Kenya’s insurance capabilities will unlock opportunities to catalyze deeper insurance market penetration in Kenya and the East Africa region,” says Gachora.
Prior to the buyout by NCBA, AIG Kenya was primarily focused on providing general insurance with branches in Nairobi and Mombasa and two satellite offices in the central business district. With the full acquisition, NCBA is now set to tap into a sizeable insurance industry in Kenya valued at Sh. 309 billion which continues to grow at a CAGR of 10 per cent even amidst ongoing macro-economic challenges.
In the same vein, this acquisition is bound to be a boon for AIG Kenya. “The acquisition marks a significant milestone in our company’s evolution. NCBA’s resources, expertise, and expansive network will enhance our capabilities,” says Stella Njunge, the managing director of AIG Kenya. “This will allow us to offer a broader range of products and services, improve our operational efficiencies, and provide greater value to our customers and partners.”
For instance, the NCBA Group currently operates a network of more than 100 branches in five countries including Kenya, Uganda, Tanzania, Rwanda, and Ivory Coast. It serves over 60 million customers, which makes it the largest banking group in Africa by customer numbers.
At the same time, AIG will now be one of six other NCBA subsidiaries including NCBA Investment Bank, NCBA Leasing LLP, NCBA Bancassurance Intermediary Ltd, NCBA Bank Uganda, NCBA Bank Tanzania, and NCBA Bank Rwanda.
“We are excited to bring the full muscle of NCBA’s capabilities to continue inspiring the growth of our customers while protecting their dreams. Through our legacy of innovation we are well positioned to catalyze the deeper market penetration of insurance in Kenya and the region,” says Gachora.
According to Ngunjiri, the bank also has proven profitability and capital record, pointing to the possibility of capital injection and expansion. This assertion is not so far fetched. In the full year 2023 for instance, NCBA’s net profit increased by 55.7 per cent to Sh. 21.4 billion. Operating income hit Sh. 63.6 billion while the bank’s balance sheet expanded to an asset size of Sh. 734.6 billion.
