NCBA’s $2 billion takeover of AIG will change the insurance landscape in Kenya

In July 2024, NCBA Group acquired insurance company AIG Kenya in a move that is expected to change the insurance landscape in Kenya. NCBA Group acquired AIG Kenya from US financial and insurance corporation American Insurance Group (AIG) in a buyout deal estimated at Sh2 billion.

The acquisition comes at a time when the local banking sector is adopting insurance as a secondary revenue stream. It also sees NCBA, which had been running a bancassurance brokerage, start its own full-fledged insurance business.

“Insurance is increasingly becoming a primary financial need for the type of clientele NCBA serves,” says NCBA Group CEO John Gachora.

Gachora’s sentiments are echoed by Ephantus Ngunjiri, a financial markets analyst. According to Ngunjiri, the AIG acquisition will not only be an additional source of income but also a boon to the development of NCBA Group as a major financial services provider in the country.

“I believe the acquisition is very strategic and at the same time safe. It is an insurance business in which NCBA Group has been a minority shareholder for almost two decades. The acquisition means that the group has learnt the ropes and is ready to grow its wide network to increase AIG’s share in the local insurance sector,” he says, noting that AIG Kenya has been operating in the country since 1972. It closed FY2023 with 3.62 billion in gross written premiums.

American Insurance Group holds 66.67 per cent stake in AIG Kenya while NCBA Group holds 33.33 per cent stake as at the end of the financial year ended December 2023. Similarly, NCBA’s investment increased from 987.3 million shillings in the financial year ended December 2022 to 1.03 billion shillings in the financial year ended December 2023.

“We believe that by combining NCBA’s physical and digital distribution platforms with AIG Kenya’s insurance capabilities, we will accelerate our goal of becoming a universal bank that meets the full range of financial needs of our customers,” says Gachora.

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According to the NCBA boss, the bank has held a minority stake in AIG Kenya for over 18 years and this strategic move brings into NCBA the over 50-year-old insurance company that has a well-established reputation in the market for providing advanced general insurance offerings to businesses, small and medium enterprises and individuals.

“This acquisition will enable our customers to conveniently access all their financial products under one roof. As insurance becomes an increasingly basic financial need for the type of customers we serve, NCBA’s ecosystem of physical and digital distribution platforms and AIG Kenya’s insurance capabilities will open up opportunities to catalyze deeper penetration of the insurance market in Kenya and the East African region,” says Gachora.

Before being bought out 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 poised to tap into Kenya’s sizeable insurance sector, valued at Sh309 billion, which continues to grow at a CAGR of 10 percent, even in the face of ongoing macroeconomic challenges.

In the same vein, this acquisition will certainly be a boon for AIG Kenya. “This acquisition marks a significant milestone in the evolution of our company. NCBA’s resources, expertise and extensive network will enhance our capabilities,” says Stella Njunge, Managing Director, AIG Kenya. “It will enable us to offer a broader range of products and services, improve our operational efficiency and deliver greater value to our customers and partners.”

For example, NCBA Group currently operates a network of over 100 branches in five countries, including Kenya, Uganda, Tanzania, Rwanda and Ivory Coast. It serves over 60 million customers, making it the largest banking group in Africa by number of customers.

At the same time, AIG will now be one of six other subsidiaries of NCBA, 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 fully leverage the potential of NCBA to continue to inspire growth for our clients while protecting their dreams. With our legacy of innovation, we are well-positioned to catalyze deeper penetration of the insurance market in Kenya and the region,” says Gachora.

According to Ngunjiri, the bank has also proven its profitability and capital, indicating the possibility of capital injection and expansion. This statement is not so far-fetched. For example, in the full year 2023, NCBA’s net profit increased by 55.7 percent to 21.4 billion shillings. Operating income reached 63.6 billion shillings, while the bank’s balance sheet expanded to an asset size of 734.6 billion shillings.