26 March 2019

Rwanda: What Sanlam-SORAS Merger Means for Rwanda's Insurance Market

South Africa's largest insurance company Sanlam Group now owns the oldest private insurance subsidiary in Rwanda, SORAS Group, following the merger of the two firms.

The development could, among other things, shake the local insurance industry and market given the profile of the two players.

The merger, announced last week, put the new entity on the lead as they control over 40 per cent of the insurance market in the country.

The merger comes at a time when the insurance industry requires a new strategy for profitability and growth.

The Rwandan insurance sector makes losses in underwriting and is only profitable due to investments in aspects such as real estate, equities and government securities.

Underwriting losses in the industry stood at about Rwf4.2 billion as of December 2018 with motor vehicle insurance accounting for about Rwf1.5 billion, according to central bank data.

Officials told Business Times this week that they were in the process of completing the merger process, revealing that they had already received the certificate of amalgamation and waiting for the final approval from the National Bank of Rwanda.

With the merger, it means that both SORAS and Saham Rwanda will become one private insurance services provider for both life and non-life, operating under the brand name SORAS.

A business consolidation plan that was being pursued by Sanlam during the merger process technically meant that SORAS, which was the biggest subsidiary of Sanlam in the country, will absorb Saham Assurance Rwanda.

All assets and liabilities of Saham Rwanda, including existing insurance policies and related obligations, will be transferred to SORAS Ltd.

According to SORAS, the consolidation of two businesses will give them a combined asset base of about Rwf37 billion for non-life insurance and a total of Rwf32 billion net asset for life insurance, a significant potential to provide value for their clients.

In an exclusive interview, Fiacre Birasa, the Chief Executive Officer of SORAS Assurance General, he said the merger is aligned with Sanlam's strategy to expand its insurance business in Rwanda and across the region.

"In business you want to be better every day. You want to put together all means and resources to be successful. This will give us ability to deliver better business and operational efficiencies that will enable us better serve our customers," he said.

Capacity for product development

Birasa said this marks the beginning of another journey for them to innovate for the clients as they have gained more capacity.

"We are now gaining more capacity, and Sanlam having been in existence for more than 100 years, we are going to take best practices from other markets; best products on the market and develop them on our market," he stated.

The insurer is striving to improve services including paying claims timely which is a constant complain which many customers believe still take a lot of time to settle.

Local insurance companies have severally been accused of cartel-like operations with clients complaining that price hikes in services are often without basis and do not match the improvement of the quality of services delivered.

For instance, the Motor vehicle owners are awaiting a price hike in car insurance as sector players are set to announce a fresh insurance premium regime claiming current premiums are unprofitable.

Birasa argued that some local insurance companies have been offering products below the market prices as a competitive tactic which has to an extent brought down the quality of services and profitability of the services.

However, he argued that with the increase of insurance penetration and insurance density - a measure of insurance development - Rwandans will be able to enjoy more affordable products and services.

Despite the sector having made some progress in regards to capital requirements, the insurance penetration remains low at below 2 per cent, indicating that there is room for growth of the insurance.

Jean Chrysostome Hodari, the Chief Executive of SORAS Vie, which deals exclusively with life insurance, they have bigger plans, including the introduction of more technology-driven services.

"We are now going to invest mainly in technology to make sure that customers have the best possible services. We are going to automate most of our operations and processes and introduce new digital products," he stated.

Hodari added that they are now able to afford such investment, even though they will also continue to invest strategically in government securities like bonds and treasury bills, as well as inequities.

The merger at a glance

Birasa highlighted that the merger was ideal as the two parties have interests in different parts of the continent and are seeking to become Pan-African.

Sanlam has a presence in Southern and Eastern Africa, while Saham Finances has a presence in Northern Africa, Western Africa and operations in the Central African region.

"They met somewhere. Since Sanlam had a vision of becoming Pan-African, there was a lot of sense for the company to complete its strategic move by acquiring Saham Finances," he said.

Sanlam entered the Rwandan market by acquiring 63 per cent stake in SORAS Group in 2014. It was followed by the acquisition of the remaining 37 per cent in 2017, making SORAS a wholly-owned subsidiary of the Sanlam Group.

In 2018, Sanlam acquired 100 per cent of Saham resulting in the Group having two businesses in Rwanda necessitating the merger of SORAS and SAHAM in Rwanda.

"In business, common sense dictates that we cannot compete with each other because certainly, Saham Rwanda became a part of SORAS [when Sanlam acquired a stake in it]," he noted.

SORAS is planning to rebrand to 'Sanlam' before the year ends.

"Insurance business is about trust, and in reality, people trust companies they believe have means and financial capacity to insure them. We are now a pan African insurer that has that capacity," Birasa noted.

Sanlam is a publicly listed company on Johannesburg and Namibia stock exchanges.

This, company officials say, indicate that the group has good corporate governance and level transparency that they want to maintain.

The Rwandan subsidiary says that they seek to strive to adhere to the global principles to sustain the company's reputation and make improvements.

Rwanda's insurance industry has registered considerable growth over time.

As of December 2018, total assets of the sector (public and private) increased by 13per cent year on year to Rwf452.4 billion, and gross premium also increased by 11 per cent to Rwf134.8 billion.

Assets of public insurers increased by 14 per cent to Rwf283.5 billion, while assets of private insurers increased by 12 per cent to Rwf169.2 billion.

editor@newtimesrwanda.com

Follow https://twitter.com/Julio_Bizimungu

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