Uganda Re was incorporated in November 2000 and commenced operations in 2013. The company is the only locally licenced reinsurer in Uganda and benefits from 15% mandatory cessions on all treaty reinsurance business in Uganda. The mandatory cessions are provided for by the Insurance Act of Uganda caption 213, the Insurance (Amendment) Act No. 13 of 2011 and Regulations of the Insurance Regulatory Authority. The company’s major shareholders are Zep Re (PTA Reinsurance Company) (21%), Kenya Reinsurance Corporation (11%), UAP Insurance Company Limited (9%), Uganda Insurers Association (8%), Continental Reinsurance Company Plc (5%). Overall, 49.1% of the company’s shareholding is held by local insurance players while 44% is held by regional (re)insurers and the balance by individuals (1.5%) and brokers (5.6%). Since Uganda Re is not part of a group, the credit profile is based on stand-alone fundamentals.
Jubilee Allianz Uganda is a subsidiary of Allianz Africa Holding GmbH (“Allianz Africa”), an intermediate non-operating holding company of Germany headquartered Allianz SE (“Allianz” or “the group”) following the strategic transaction with Jubilee Holdings Limited that consummated in October 2021. Under the transaction, Allianz Africa acquired 66% of the company’s shareholding, with a 34% shareholding remaining under Jubilee Holdings Limited (“Jubilee group”) through The Jubilee Investment Company Limited. The continued shareholding by the Jubilee group is structured to ensure a long-term partnership between the transacting parties. In this respect, no material changes in business relationships and processes are expected from the change of ownership, with a transitional period of two years from the date of transaction having been cut out to ensure a well-managed integration into the Allianz ecosystem. However, this could take longer than planned due to high assimilation levels of the insurer to the Jubilee group.
Over the medium to longer term, we expect Jubilee Allianz Uganda to stabilise relationships within the vast business network and franchise built by the Jubilee group and its parent the Aga Khan Development Network in East Africa and combine these strengths with the global hegemony of Allianz in offering world class insurance solutions. Nonetheless, the transition period poses risk with regards to market repositioning in Uganda that could erode envisaged brand synergies.
Given that Allianz has gross premiums of EUR147bn, Jubilee Allianz Uganda is a small entity within the group, contributing less than 1% of gross premiums at a scale of less than EUR25m in FY21. We have, therefore, assessed the credit profile of the insurer on a stand-alone basis.
Uganda is located in East-Central Africa with a population of 43.7m. The country has substantial natural resources, including fertile soils, regular rainfall, substantial reserves of recoverable oil, and small deposits of copper, gold, and other minerals. Uganda relies heavily on agriculture which is about 25% of the economy, 50% of exports and 70% of employment, and this has contributed to wage income volatility and stagnation. Investment plans in the Ugandan oil sector are expected to start producing and exporting by 2024/25. Oil revenues and taxes are expected to become a larger source of government funding as oil production starts.
EADB is a regional MDB that is mandated to strengthen socio-economic development and regional integration. It has ownership by 4 African member states and a few institutional shareholders. Headquartered in the Republic of Uganda, EADB was established in 1967 under the treaty for East African Community which was disbanded in 1977 and later revived in 1980. Following this, the Bank was re-established under its own charter, with an expanded potential membership, mandate, and operational scope. As such, EADB is accorded preferred creditor status equivalent to that of the AfDB including privileges and immunities such as diplomatic and tax-exempt status.
This bulletin was compiled and collated in order to:
- Summarise credit views on the 20 short-term insurance companies in East Africa publicly rated by GCR.
- Indicate trends in premium income and underwriting performance across the different countries and individual insurers.
- Present solvency and liquidity levels reflected by the various insurers.
- Present a direct comparison of balance sheet and income statement data over the past five years of operation.
- Uganda’s insurance sector is amongst the most profitable markets in the sub-Saharan Africa region, notwithstanding its relatively small size of circa USD265m, due to strong enforcement of minimum rates regulations. This has fostered better underwriting profitability in the more fragile short-term industry, given rising margin pressures within the region. Performance gaps still exist however, as profits are unevenly distributed, and insurance penetration is low.
- In 2020, the Insurance Regulatory Authority (‘IRA’) doubled down on regulation, adding wide-ranging regulatory reforms which are credit positive for the sector. The regulations span risk-based supervision, index insurance, mobile insurance, corporate governance, and reinsurance. These disciplines could substantially mitigate key risks in the sector.
- We expect risk-based supervision to have a positive impact on capital and liquidity through capital injections, de-risked investment portfolios and low exposure to receivables. This could also lead to lower impairments and risk to investment income, uplifting earnings for stronger players while potentially forcing consolidations among smaller players over the medium-term. Combined with index and mobile insurance, the industry is set for sound risk-adjusted premium growth, albeit an increase in insurance penetration could remain aspirational currently, yet realisable over the longer term. We are, therefore, likely to improve the sector’s current score of ‘3.75’over the medium to long-term if projected sanguine trends are sustained.