When Universal Insurance Plc announced it had acquired 100 percent of African Alliance Insurance, something moved in the bedrock of Nigeria’s financial establishment. This was not only an acquisition of yet another insurance company—it was an industry development with key ramifications.

New ownership at African Alliance will affect how the company expands its coverage and integrates aspects of innovation that had previously been beyond its reach. According to local media, the capital injection has turned around the company’s fortunes. At a press conference in April, Managing Director Alphonse Okpor told reporters that the influx also covered ambitions in the banking sector.

“The new tempo we are witnessing has transformed our performance and service delivery platforms. The influx of tried-and-tested professionals, meanwhile, has boosted our product development, asset management, financial advisory and Information and Communication Technology (ICT) departments,” Okpor told the Nigerian Tribune.

The equity takeover was also good news for products like micro-insurance schemes. Designed for low-income customers, micro-insurance is a low-premium and low-coverage instrument popular in South Africa and Kenya. The risk-pooling concept helps shield communities in the aftermath of natural catastrophes. In Nigeria, the formula could prove highly profitable.

But in the long-term, African Alliance’s Chairman Cyril Ajagu is interested in the larger yields of cross-selling services and investment-linked premiums. Part of his interest in African Alliance is to sell the services of the insurer to Universal Insurance’s corporate clients. He sees African Alliance moving into asset management and low-risk investments in the hospitality industry, for example. That is what he calls putting capital to work.

“It’s an integral part of our re-engineering strategy. All the company employees we serve are part of Nigeria’s emerging middle class. They need superior types of insurance products. African Alliance will be able to meet these needs and this new demand,” says Ajagu.

Another upshot for Nigeria’s financial sector is the creation of a one-stop financial outfit able to compete with banking institutions. Universal Insurance already bought stakes in a micro-finance bank earlier in 2008. It is now on the lookout for equity in a commercial bank.

As for investment-linked premiums, it is largely a matter of educating the public. Four years ago, few understood the complexities of an insurance premium, so Ajagu came up with the winning formula of investing premiums in low-risk, high-yielding assets.