Jubilee chairman Nizar Juma (left) with the insurer’s CEO Patrick Tumbo
when they announced the firm’s results June 10, 2014. FILE PHOTO|NATION
By VICTOR JUMA
In Summary
- Jubilee currently has insurance and investment subsidiaries in Kenya, Uganda, Tanzania, Burundi and Mauritius, with the firm ranked the largest insurer in the majority of these markets.
Jubilee Holdings
is spending more than Sh3 billion on property developments in Uganda
and Tanzania and looking to grow its insurance business across the
continent by acquisitions or setting up of new operations.
The company currently has insurance and investment
subsidiaries in Kenya, Uganda, Tanzania, Burundi and Mauritius, with the
firm ranked the largest insurer in the majority of these markets.
Jubilee collected Sh5.5 billion in total gross
premiums in the first quarter, cementing its position as Kenya’s largest
insurance firm according to statistics from the Insurance Regulatory
Authority (IRA).
The Business Daily spoke with Nizar Juma,
the chairman of Jubilee Holdings, on the company’s growth plans and
emerging issues in the local insurance market.
Could you share with us Jubilee’s growth plans?
We are looking for acquisitions locally and in the
regional market. We are looking for companies that have a DNA like that
of Jubilee. We are fastidious in terms of ethics in business, including
tax compliance.
There are some negotiations currently ongoing with
target companies and we will announce the details later when everything
is finalised. There are instances where we will go greenfield, but
acquisitions remain our preferred expansion mode.
Which specific markets are you looking at?
We are not limited; we want to grow both in our
current operations and new markets as well. Our ambition is to be the
most important financial services group on the continent.
West Africa offers good opportunities for us and we
will likely use the greenfield option there. We are already doing some
business in these countries through the Aga Khan Development Network.
We had plans to also start operations in South
Sudan but we have shelved it due to the situation there. We remain
focused on expansion and we recently brought in a CEO for the Jubilee
Group whose main role is to spearhead the company’s growth strategy.
In markets where Jubilee has existing
operations, are the acquisitions aimed at entering insurance segments
where the company does not yet have a presence?
We are major players in all insurance classes and
lead in the major ones like medical insurance. Our goal is to grow
market share. In searching for acquisitions, we are not precluding
companies that underwrite business similar to that of Jubilee.
How will Jubilee fund the acquisitions and new startups?
Mainly through undistributed profits (retained earnings). Our
shareholders are also ready to provide more money should we come across a
large acquisition that we cannot fully fund from our internally
generated cash. We have never asked shareholders to put in new money
since 1985 but it’s an option that we have.
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What is Jubilee’s investment strategy?
We look for opportunities that give us strong and
reliable returns. This is especially important for our long-term (life)
business. We have invested in infrastructure projects such as Seacom (a
fibre optic firm) and Bujagali (a Uganda-based power company). In Bujagali, for instance, we have a satisfactory and guaranteed internal rate of return for the long term.
These are the kinds of investments that we find
attractive. We are also investing in the real estate sector through our
associate PDM Holdings Ltd.
Does Jubilee plan to undertake any new property developments in the near term?
We have two upcoming projects in Uganda and Tanzania. We are contributing equity in the projects that will be built by PDM.
What type of property developments will these be and what is the capital expenditure?
They are residential and commercial properties and
we have already purchased the land. The Uganda project will cost Sh1.8
billion and the one in Tanzania will cost Sh1.5 billion.
What new issues are emerging in the local insurance business?
One of the key issues is the separation of life
insurance from general insurance. This is not yet an obligation in Kenya
but we will do it. This is the direction in the global insurance
business and it is welcome.
The main idea is to avoid problems in one business
from spreading to another like was the case during the 2008 global
financial crisis. It is particularly important for safeguarding the
interests of customers holding life insurance policies that are long
term in nature.
What exactly does this split entail?
It means that you have an independent executive
team, offices, branches and support services for each of the two types
of insurance business.
What are the cost implications of such a structure?
It will obviously cost more to effect this separation, driven
largely by hiring of more staff. But the biggest problem is filling the
new vacancies that will be created at the higher level. It’s hard to
find top executive talent in this region.
We are in talks with the regulators so that the split is not
carried out is such a way that it will deny businesses economies of
scale and synergies. Our view is that the two lines of businesses should
be able to run on the same branch network and share services such as
marketing and branding.
Is Jubilee effecting this separation in all its markets?
Yes, we intend to do this across our business in
the short term. We have already done it in Uganda, Tanzania, and
Mauritius. Kenya and Burundi are the remaining markets.
vjuma@ke.nationmedia.com
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