, NAIROBI, Kenya, Oct 26 – The Co-operative Bank of Kenya has raised its stake in Co-operative Insurance Company (CIC) from two percent to 21 percent indicating its intention to strategically position itself to capture more market share in the highly competitive banking industry.
Co-op Bank Managing Director Gideon Muriuki viewed the strategic partnership as one that would enable the two institutions whose core customers are in the co-operative movement to reap long term benefits in their businesses.
“The bank has increased its shareholding in CIC to 21 percent thereby becoming a substantial and the single largest shareholder of the insurance company,” said the MD who further disclosed that the deal cost approximately Sh130million.
The acquisition will see the two firms leverage on each other’s network and resources which will in turn increase their product and service offerings to boost competitiveness, maximise return to their shareholders and also deepen the financial market.
CIC will sell insurance products through Co-op’s branch network of 85 outlets while the bank will leverage on the insurer’s network to sell and promote bank-assurance services.
“This of course strengthens the bank’s financial ‘supermarket’ model by providing insurance services. We will then look at the modalities of providing insurance services as an agent of CIC,” Mr Muriuki said adding that they will have two of their directors sitting on the insurance firm’s board.
CIC Managing Director Nelson Kuria projected a rise in insurance penetration and added that they intend to ride on the back of Co-op Bank’s expansion plans to increase their footprint in the region.
“It is more focused; it is going to bring more efficiency through specialisation and so it can only be better for us and for the market in terms of penetration. We are looking at Southern Sudan where the bank will be going soon and we are also discussing with prospective partners in Rwanda, Tanzania and Malawi,” Mr Kuria said.
The buy-in is also expected to come in handy for CIC Insurance which is looking to double its share capital to Sh1.2 billion through a rights issue and a private placement before the end of the year.
Proceeds raised from these transactions including a planned Initial Public Offering in 2013 will be used to expand into new areas of business both locally and regionally.
Stock market analysts hailed the move as a positive development that would be reflected in the two companies’ profitability in coming months.
The announcement seemed to have been received well by investors with the Co-op bank counter rising by 3.70 percent by Tuesday afternoon.