African Alliance’s ambitions for growth mean that product development and better services will form part of the sector’s future

Why is the acquisition of African Alliance by Universal Insurance so important for Nigeria? It may have to do with the emergence of an entirely new economic sector that had previously kept a low profile. With the current boom in commodity prices, however, Nigeria is poised to become an emerging market capable of affecting change in the rest of Africa. This means that any large acquisition signals a long-term trend. And the trend in the insurance sector is expansion, both domestically and globally.

According to Oladipo Bailey, a former Nigerian commissioner for insurance, the merger has set the stage for more strategic alliances that are poised to take advantage of opportunities in the marketplace. For Bailey, mergers and acquisitions act as spark plugs for sectors like insurance, otherwise low in glamour. The surprise factor is that insurance is no longer a behind-the-scenes actor, but one that can bring local businesses in line with international standards. So far, the National Insurance Commission (NAICOM) is encouraging the wave of mergers and acquisitions.

“The move by Universal Insurance is quite commendable and is in the right direction. I was looking forward to the day when two big insurance companies here in Nigeria would come together to form a major company as we have seen repeatedly in the US, UK and other European countries,” Bailey told the Nigerian Tribune recently. On an African scale, such moves not only build robust capital, but also attract key human resources to an erstwhile little-known sector of the economy.

Partnering with foreign insurance specialists is part of Cyril Ajagu’s expansion dream. As the new Chairman at African Alliance, he is targeting companies with a low-claims track record and strong business ethics. It should also be an entity that is open to diversification of its own portfolio, such as the emerging markets in Africa. With its strong position in the West African market, Ajagu thinks African Alliance is ready for association with a leading global brand.

“Our board is very strong and has a global vision and mindset, so we would want any partner we associate with to have a similar approach. We have the oldest insurance business from western Nigeria and the oldest business from the eastern part of the country. We won’t be happy with anything less than one-third of the insurance market share in Nigeria. That is our target,” says Ajagu.

To fund long-term growth, African Alliance will be putting its profits to work. Proceeds from the private placement will be used to expand the company and develop its operational infrastructure, particularly in IT. According to Ajagu, organic growth will be more sustainable with the right people in place. Input from new faces will help prepare African Alliance for the challenge of a global insurance market.

There is a whole universe of instruments that can be developed to meet all the new requirements in the market. Life insurance, after all, is a very particular business with long trajectories. “We need to expand our product portfolio. It has to be a portfolio that accompanies clients from one to 80 or more years. The portfolio must be structured in such a way that, at any point in time, a client can make a justifiable claim and be reimbursed,” asserts Ajagu.