Axa Says Nigeria Election Process a Boost to African EconomyFabio Benedetti-Valentini and Renee Bonorchis
Axa SA, the largest foreign insurer active in Nigeria, sees the peaceful manner in which the country is handling its first transition in political power in decades as supporting economic growth in the country and beyond.
“We think that political stability and the respect of democratic rules in this vote can only consolidate development potential in Nigeria and other African countries,” Jean-Laurent Granier, head of Axa’s global property and casualty business -- or short-term insurance -- said in an April 2 interview.
A largely peaceful election in which Muhammadu Buhari defeated President Goodluck Jonathan has bolstered investor confidence. Nigeria’s insurance penetration is about a fifth of the average on the continent and less than a 20th of the level in South Africa, underscoring the opportunity in a country with 177 million people.
“We are not making a political interpretation of this outcome,” Granier said. “This reinforces and confirms our will to grow in Nigeria.”
Axa has disposed of 8.9 billion euros ($9.7 billion) of assets in developed markets since 2010 to invest in faster-growing nations, including African markets. In December, it spent 198 million euros to buy a majority stake in Mansard, Nigeria’s fourth-largest insurer. Last month, Paris-based Axa completed the purchase of a 7.2 percent stake in pan-African reinsurer Africa Re for $61 million.
The victory by Buhari, 72, marked the first time an opposition candidate beat a sitting president since independence from the U.K. in 1960. And while more than 80 people were killed during the election campaign, according to the European Union, and there were some allegations of rigging, most international and local observers called the vote relatively free and fair.
Insurance penetration in Nigeria, as measured as a percentage of premiums to gross domestic product, was 0.68 percent in 2012, according to a KPMG report in August. That compares with a 3.5 percent average for Africa and 15.4 percent in South Africa, the continent’s biggest insurance market, according to figures from PriceWaterhouseCoopers in October.
Insurance premiums tend to increase faster than economic growth in Nigeria and African countries, as companies and households adjust their coverage to “catch up” with rising living standards, Granier said.
“The corporate insurance market was first to develop and now the market for individuals is opening,” he said. Health insurance products sold through corporate or individual policies, car-insurance needs and micro-insurance initiatives are contributing to insurance expansion in Nigeria, as in other fast-growing African markets, he said.
Nigeria has about 60 registered insurance companies, according to the national regulator. Among factors that companies should incorporate into risk models when underwriting in Nigeria is the unusually high number of building collapses, PwC said in a March 30 report. In the last 12 years, this has happened to an estimated 30 buildings, it said.
Mansard has increased annual revenue by more than 20 percent in “these last years and this company can keep having high growth,” Granier said, without giving a target for this year.
Since March 31, when Buhari won the election, Nigeria’s benchmark stock index has climbed 15 percent to levels not seen since November last year. It’s the Nigerian Stock Exchange All Share Index’s longest streak of gains since September 2012.
The stake in Africa Re will allow Axa to get a “more complete understanding on insurance markets’ evolutions across the whole continent,” Granier said. “We’re selecting places where we want to go because we think a country has critical size and is ready for development of insurance.”
Before its Nigerian acquisition, Axa had operations in six African countries, including Morocco and Senegal, which contributed 436 million euros to revenue last year. Axa is studying opportunities to enter other African countries through acquisitions or by starting new businesses, Granier said. “Countries like Kenya can interest us, Ghana too,” he said.
In Egypt, Axa has set up a team of about 10 people and is “very confident to start quite soon” with operations once local authorities grant a license, Granier said.