France’s Axa to buy stake at UAE insurer Green Crescent for Dh100m

Axa said last week it was looking for more acquisitions in emerging markets after it posted a 14 per cent rise in full-year net income and lifted its dividend 13 per cent.

Axa, Europe’s second-largest insurance group, said last week it was eyeing more acquisitions in emerging markets. Nicolas Maeterlinck / AFP / Belga

Axa, the French insurance multinational, and its local partner plan to take a stake in the UAE insurer Green Crescent Insurance Company (GCIC), marking the first sign of a shake-up in the crowded insurance market.

Under the deal, Axa and Kanoo Group would be the primary investors of a capital increase in GCIC of Dh100 million through a convertible bond instrument. The move would raise GCIC’s paid-in capital to Dh200m upon conversion. The investment is subject to shareholder and regulatory approval.

Axa declined to reveal the size of the stake under discussion.

“The linkage of GCIC’s extensive local market knowledge and technical experience with Axa’s deep industry expertise and capabilities represent a unique opportunity for GCIC to expand our product offering and market share,” said the GCIC chairman Sheikh Saeed bin Hamdan Al Nahyan, announcing the proposed investment.

“The proposed deal is expected to provide significant value creation for shareholders, enabling GCIC to further penetrate the UAE health segment while leveraging our life licence to provide further growth in premiums and margins.”

The proposed investment is a long-awaited sign of consolidation in the hotly competitive local insurance sector after years of some insurers offering premiums at below the real cost.

This month, GCIC announced the chief executive Hazem Al Madi had resigned and would leave on Friday. Mr Al Madi helped to steer the company through a restructuring after losses that in late 2012 led to shareholders meeting to decide whether to dissolve GCIC. They voted to keep the business going by cutting its capital by more than half to Dh100m.

Jerome Droesch, the chief executive of Axa Gulf, said the deal would allow the company to capture a slice of the UAE’s life insurance sector. Axa is currently the largest non-life international insurer in the Arabian Gulf, with a footprint covering health, motor and travel insurance. But it does not yet hold a licence to operate within the UAE non-life sector, which is growing at an estimated annual pace of 27 per cent.

Founded in 2008, Abu Dhabi-based GCIC specialises in health and life insurance.

“Currently, we have got a significant market share in the medical and other non-life segments. Customers now require more all inclusive solutions embedding life insurance products,” said Mr Droesch.

“This new partnership will allow us to provide full comprehensive solutions for our customers in the UAE, leveraging Axa’s brand and knowledge within life insurance and the local market knowledge of Green Crescent Insurance Company.”

Axa, Europe’s second-largest insurance group, said last week it was eyeing more acquisitions in emerging markets after posting a 14 per cent rise in full-year net income. It has been snapping up companies from China to Colombia to help to offset sluggish growth in Europe and the United States.

GCIC will hold an extraordinary shareholder meeting on March 26, where shareholders will decide whether to agree to Axa’s deal.

Better access to medical care and an ageing population have been pushing up the frequency of UAE healthcare insurance claims in recent years. As a result, the bottom lines of many insurers have been strained.

Fareed Lutfi, the secretary general of the Emirates Insurance Association, said he expected further shake-ups in an industry still crowded with smaller brokers despite rising costs of 10 to 15 per cent annually.

“We need more consolidation but we cannot force it by law,” he said.

“Bigger companies are overcapitalised but smaller ones are still undercapitalised. The thinking has to change and more focus is needed on the bottom line.”

GCIC’s stock finished 2.19 per cent higher yesterday at Dh1.40 per cent. The company’s share price has more than tripled since the end of 2012.

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