Insurance giants Allianz, Sanlam sign US$2.1 billion merger

• Allianz reports that the overall group equity value is estimated to be more than US$2.1 billion, and the new business is likely to rank in the top three in the majority of the areas in which it operates.
• Initially, Sanlam will retain a 60 per cent stake in the joint venture, with Allianz holding a 40 per cent stake and the option to purchase an additional nine per cent at a later date
• Insurance penetration in Africa is considerably lower than the global average, standing at 2.78 per cent in 2019 compared to 7.23 per cent globally
• Only about 1 per cent of the population in Sub-Saharan Africa has insurance coverage

South African insurer Sanlam and German insurance giant Allianz have agreed to create a joint venture that will consolidate both their present and future activities across Africa.

The largest non-banking financial services institution in Africa

The partnership between the Sanlam and Allianz has created the largest pan-African non-banking financial services institution on the continent.

According to a statement by Allianz, the overall group equity value is estimated to be more than US$2.1 billion, and the new business is likely to rank in the top three in the majority of the areas in which it operates. Business segments of both Sanlam and Allianz will be housed under the joint venture, which will operate in the African nations where one or both businesses have a presence.

While South Africa will be excluded from the deal entirely, Namibia will be included at a later date.

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Initially, Sanlam will retain a 60 per cent stake in the joint venture, with Allianz holding a 40 per cent stake and the option to purchase an additional nine per cent at a later date.

According to a statement from Sanlam, which is located in Cape Town, “in keeping with both parties’ long-term commitment to the strategic relationship with the continent the parties have committed to staying involved in the joint venture for a period of at least 10 years.”

The joint venture ownership allocation will be determined by the proportionally assessed worth of assets they will be contributing.

The proposed business deal, according to the company, “will enable Sanlam to enhance its capabilities in existing markets while simultaneously expanding its footprint and market-leading positions in certain key jurisdictions on the African continent.”

What Sanlam stands to gain in the partnership

In the partnership with Allianz insurance, Sanlam expects to reap a number of strategic benefits, including knowledge exchange, cost savings, the creation of an integrated platform, and the potential for synergies for both the joint venture and the South African company.

The experience and financial power of two well-known and renowned businesses will be combined, allowing clients throughout Africa to benefit from the combined knowledge and financial strength.

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Sanlam has a direct ownership interest in financial services firms in 13 countries in sub-Saharan Africa. Owing to its 2018 purchase of SAHAM Finances, it has also earned exposure to the majority of North and West African nations, with the exception of the key Egyptian market, which Allianz will handle due to the company’s presence in Cairo. This has resulted in the establishment of a new pan-African non-banking financial services business, which will operate in 29 African nations as a result.

Among the assets to be transferred are Allianz’s ownership interests in its African subsidiaries, which include majority holdings in Jubilee general insurance operations in Kenya, Uganda, and Burundi, which the company recently bought in cash. Sanlam will contribute its interests in Sanlam Kenya (57.1 per cent) and other activities, as well as its cash reserves. In addition to South Africa and India, the multinational’s businesses in the Middle East and Malaysia will be exempt from the agreement.

Insurance penetration in Africa

According to Sanlam group CEO Paul Hanratty, the proposed joint venture would reinforce their leading position in many major areas that are critical to their African strategy, while also enhancing quality and scale where it counts the most.

The fresh collaboration between the two insurance corporate giants will allow Sanlam to expand its operations northward, putting it in direct competition with companies such as NSIA, Sunu, and Axa which still hold significant market share in French-speaking countries such as Côte d’Ivoire Senegal, and Cameroon among others.

Only about 1 per cent of the population in Sub-Saharan Africa has insurance coverage, according to estimates. Insurance penetration in Africa is considerably lower than the global average, standing at 2.78 per cent in 2019 compared to 7.23 per cent globally.

South Africa accounts for around 69 per cent of total insurance premiums in Africa, making it a significant player in the continent’s insurance sector. Other important nations, such as Morocco (6.6 per cent), Kenya (3.3 per cent), Egypt (2.8 per cent), and Nigeria (2.4 per cent), have great potential for insurance uptake.

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