By Favour Nnabugwu, with agency reports

AFRICA Reinsurance Corporation (Africa Re) has signed two agreements with two leading global investors, Fairfax Financial holdings and AXA Insurance which paid $61 million to become a new shareholder of Africa Re.

Fairfax acquired a 7.15% stake and a seat on the Board of Africa Re  on March 25, 2015  while the Reinsurance giant also signed investment deal of $61m with AXA for 7.15% equity on February 20 this year.

The new strategic partnership with Fairfax, after the recent entry of AXA in February 2015, has strengthened Africa Re with $122 million capital. It is also a clear strategic move intended to achieve strong business partnerships with global industry players.

Mr. Corneille Karekezi, Africa Re’s Group Managing Director said, “We will work together to strengthen our positions in the reinsurance market with regard to product development, underwriting expertise, human capacity development, actuarial services, enterprise risk management, corporate governance, claims management and investment.”

He said that it was a great development for Africa Re, demonstrating the maturity of the company, its commitment and ability to strategically position itself in the fast changing and competitive landscape of the international reinsurance industry.

The shareholding structure of Africa Re has changed over time from a pure multilateral institution in the 1970s and 1980s to a diversified shareholding comprising 41 African states (34%), more than 100 African insurance and reinsurance companies (33%), the African Development Bank (8%), IRB-Brasil Re, a leading Brazilian reinsurer (8%), AXA, the global leading French insurer that joined recently with a 7.15% stake and Proparco, a branch of the Agence Française De Development.

Investment horizon

Until recently, development finance institutions (DFIs), including the International Finance Corporation (IFC), member of the World Bank Group, DeG (branch of the KfW bank) and FMo (Dutch development finance organisation) constituted the core of the non-African shareholding capped at 25% of the capital of Africa Re. Fairfax has acquired part of the shares put back by those DFIs that invested in Africa Re capital in 2004 and are exiting in accordance with a put option agreement allowing them to exit after the elapse of their investment horizon.

It will be recalled that Africa Re has posted a net profit of $118.50m for the full year 2014 compared to $84.80m in 2013, representing an increase of 39.74%.

The performance was driven by strong underwriting profit and steady investment results and was 7.37% higher than the Corporation’s five-year plan projections.

Gross written premium grew by 7.02% from Us$670.46m in 2013 to Us$ 717.53m. The growth trend continues to be impacted by the depreciation of the major transaction currencies of the Corporation and a competitive operating environment.

The Corporation attributes the good performance to increased income from treaties as a result of additional shares secured during treaty renewals. An improvement of loss experience in almost all classes of business (energy, fire/engineering, life, marine and motor) which led to a drop in the net loss ratio for most production centres, also contributed to the positive results.

Income earned by the Corporation from investment and other sources, including interest on reinsurance deposits and fee income, increased by 8.84% to stand at U$50.50m compared to Us$46.40m in 2013. Investment performance continues to be driven mainly by the equity and bond markets. Currency translation had a negative impact on the investment income. On an annualised basis, the return on investment was 4.78% compared to 4.53% as at the same period last year.

Meanwhile, Axa acquired part of the shares put back by some Direct Foreign Investors (DFIs) that invested in Africa Re capital in 2004 and are exiting in accordance with a put option agreement allowing them to exit after the elapse of their investment horizon.

Those DFis normally invest in companies to support their development and, as they are indeed investment funds, have to exit after a certain time, generally between five and 10 years.

Commenting on the new development, Karekezi said, “The exit from our shareholding by some DFis and the coming in of Axa is a natural development, intended and well planned by both parties.

Talking about what AXA will bring to Africa Re, Karekezi stated: “With AXA on board, Africa Re will gain a lot. indeed, as our customers’ demand of tailored products with international standards is fast growing, we need to keep our market and competitive positions in Africa and meet that demand. Africa Re will tap into AXA’s immense expertise and research development, refined global market knowledge and cutting edge corporate solutions in insurance and risk consulting.”