South Africa-based pan-African investment group Old Mutual Limited has unveiled plans to expand operations in West Africa through at least two strategic acquisitions in the next five years to boost its dominance in the region, according to MoneyWeb.
Old Mutual is a pan-African investment, savings, insurance and banking group based in Johannesburg. It offers general financial services in about 17 countries, mainly in Africa and China.
The decision to take on new acquisitions in West Africa came after the Iain Williamson-led group recognized a unique opportunity in the region that gives it room to benefit from the insurance industry’s growth potential.
The largest market in the region, Nigeria has one of the lowest insurance penetrations globally, with only one percent of the population having any form of risk cover.
Earlier this year, the Johannesburg-based group disclosed that it will consider acquisitions and strategic partnerships where necessary to build scale, fill proposition gaps for customers and acquire new capabilities to deepen its involvement in the African insurance industry.
This follows a similar decision by another South African group, Sanlam, as insurers seek growth opportunities to diversify systemic risk and uncertainties heightened by the COVID-19 pandemic.
According to the group, the acquisitions, which will be subject to board and regulatory approval, will enable the company to boost its underwriting business in Ghana and Nigeria, putting the group in a position to migrate to other financial services in the region.
The management noted that all opportunities will be measured against a strict acquisition framework, which ensures that any acquisitions considered must meet its targeted four-percent return of the equity cost.
Samuel Ogbu, CEO of Old Mutual West Africa, said the market size controlled by the South African insurer in West Africa is a key consideration for customers choosing regional insurers.
“This is a market where if you are outside the leading companies, then you really struggle to get attention, not only from the corporate sector but also from the retail sector. We have held talks with several parties and we are likely to make acquisitions,” he said.
In the first half of 2021, Old Mutual posted a profit of R2.98 billion ($202.56 million), compared to the loss of R5.62 billion ($381.85 million) that it recorded in the first half of 2020.
The group had R32.46 billion ($2.21 billion) in cash and cash equivalents as of June 2021, giving it a unique advantage to deepen operations in West Africa through strategic acquisitions.