Germany’s Allianz S.E., the world’s leading insurance firm, this week fully acquired the Janashakthi Insurance PLC’s general insurance business for Rs.16.4 billion, eyeing a top spot in Sri Lanka non-life insurance landscape.
“Most of the markets we are in, we want to be on top,” Allianz Asia Executive Board Member Zakri Khir told reporters in Colombo, explaining the rationale behind the acquisition.
Post-merger, Allianz’s fully owned local subsidiary Allianz Insurance Lanka Limited, would come close to the first spot with a market share of around 20 percent, according to Khir.
Janashakthi General Insurance Limited was the third largest general insurer earlier, according to Allianz Insurance Lanka Managing Director Surekha Alles.
Alles had grown the local Allianz operations from the greenfield investment in 2004 to the position it was before the merger without any additional investment from the parent.
The trade was worth double the net asset value of Janashakthi General Insurance and Khir said that such a premium needs to be paid to acquire an industry leader with which Allianz could expand at an accelerated pace.
“We don’t want to spend time restructuring. We want to gain market share, or others will be aiming for our market share. We will accelerate this year, “ Khir said.
He said that particular attention will be given to expanding business in the up country and rural areas and that Sri Lanka is the market to be in for growth, with higher foreign direct investment into the country providing evidence that Sri Lanka’s economy has opportunity for foreign investors.
“The market is growing, the economy is growing and when that happens, people gather more assets which can be insured,” he added, further rationalizing the acquisition.
From 2010 to 2016 Sri Lanka’s general insurance market had grown by a 12.1 percent compounded annual growth rate.
General insurance in particular has become competitive following a regulatory direction forcing insurance companies to segregate general and life insurance activities and Allianz Insurance Lanka-Janashakthi General Insurance merger is one of many mergers witnessed following the segregation process.
Janashakthi too in 2015 acquired AIA’s general insurance arm for Rs.3.2 billion.
Selling the business just over two years after a major acquisition was the right thing to do, according to Janashakthi Insurance PLC Director Ramesh Schaffter.
“This is not a sale. It’s an evolution of a business, which we have poured our hearts into. It’s a marriage and we wanted the non-life business to go to greater heights with the world leader,” he said.
Meanwhile, Janashakthi will be providing a share buyback for its shareholders to distribute some of the proceeds from the sale of the general insurance business.
The Schaffter family controls the Janashakthi Group. Ramesh Schaffter said that Janashakthi will continue to make inroads into the life insurance market, and is looking for a partner for technical collaboration and to take on a minority share in the business to take it forward.