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Life insurance catches on- 5 years after split of life and non-life businesses

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Left - Right, Zephania Dube Chief Operations Officer, Arjun Mallik, Managing Director East Africa and Nashiba Nalubega, Marketing and Communications Manager of Prudential Uganda at a press conference to announce a bonus that was accredited to Prudential clients' Policies. This was at a Press conference held in Kampala on 7th May 2019 at Golden Tulip. Prudential, is one of the latest players in the life business, after it acquired Goldstar Insurance’s life arm in 2016.

Nine Life Assurance Companies, in 2018 underwrote UGX216.88 billion, nearly 4 times the amount of business the sub-sector underwrote in 2013- a year before the regulator took a strategic decision to separate life and non-life insurance businesses, in September 2014.

Since then the life business, as it is known has grown by leaps and bounds, attracting 3 new regional and global players and raking up more premiums.

Life insurance gross written premiums grew by 28.69%, from UGX168.53 in 2017 to UGX216.88 billion in 2018. The previous year, it grew by 27.19% from UGX132.5 billion.

Distribution of Gross Written Premium Income (2017-2018)

By comparison, the entire insurance industry grew by 17.51% in 2018 and 14.75% the year before that. In fact, in 2018 life insurance outgrew entire industry for the 5th straight year.

Non-life insurance business income grew by 12.36% from Shs507.2bn in 2017 to Shs570bn in 2018, While Health Membership Organisations (HMO’s) grew by 31.25 % from Shs52.7bn in 2017 to Shs69.1bn in 2018.  

Consequently, life’s industry contribution has consistently risen from 12% in 2013, growing year on year to 25.3% in 2018, eating into both into HMOs and non-life.

As a result, non-life insurance contribution to the entire sector has reduced from 76% in 2015 to 66.6% while HMOs has reduced from 12% in 2013 to 8.1% in 2018. Medical Insurance is a major component of life insurance- accounting for 14% in 2017- UGX24bn of the UGX169bn life premiums went to medical insurance.

Key Insurance Industry Trends according to IRA

Life insurance is composed of 4 major products: life individual- the most dominant, followed by life group, medical insurance and Deposit Administration Plan (DAP).

Who are the leading players in life insurance?

The Life assurance business is a fairly balanced with the top 5 out of 9 companies holding significant portfolios all running neck to neck.

UAP Life Assurance, the industry leader with a 22% market share, grew premiums written by 8.25% from UGX44.13 billion in 2018 to UGX47.77 billion in 2017.

UAP Life Assurance’s Sales Manager- Corporate Allan Lwanga cutting cake with pupils of Mother Manjeeri primary school in Kirinya, Bweyogerere to mark the launch of UAP Somesa Plus Schools Product. Innovations and the entry of new players, coupled with favourable regulatory policies have spurred growth in the life business that now accounts for 25% of the insurance industry.

Liberty Life Assurance, although it posted a 5.54% decline in premiums- from UGX37.56 billion to UGX35.48 billion, it remained the second biggest life assurance company with a market share of 16.36%.

Sanlam Life in the 3rd position and a market share of 16.22%, increased their premiums by a whopping 41.86% from UGX24.8 billion to UGX35.18 billion- just a few million behind Liberty Life.

ICEA Life Assurance, in the 4th position and with 15.4% market share grew their premiums by 21%, from UGX27.59 billion to UGX33.38 billion.

Jubilee Insurance grew by 27.73% from UGX21.66 billion to UGX27.66 billion and occupies the 5th place.

Prudential Assurance, which in June 2015 acquired the life business of Goldstar Insurance, registered a 190.49% growth in premiums, nearly tripling the UGX6.96 billion premiums in 2017 to UGX20.24 billion.

New players, CIC Life which entered the Uganda Market in 2014 and Metropolitan Life which entered Uganda in 2017 are in the 7th and 8th positions.

CIC Life in grew picked up UGX9.9 billion in premiums while Metropolitan picked up UGX5.17 billion. NIC Life is in the last position with just UGX2 billion in 2018 premiums.

Liberty Life to pull out of Uganda

Liberty Holdings, the parent company of Liberty Life has indicated, it is exiting Uganda this year over what it calls “mixed results” over the years, “impacted by sub-optimal scale across most product offerings” as well as high operational risks relative to potential returns and market challenges that among others included competitor practices and immature product categories.

Liberty has also indicated it is leaving Malawi and Tanzania over the same reasons.

The Liberty Group, a South African insurance firm, has put on sale its Kenyan investment advisory business, Stanlib, which has Sh135 billion worth of assets under its management. Liberty Holdings in Uganda, other than Liberty Life Assurance also owns Stanlib Uganda- which will also be sold.

Projections for 2019 look even rosier, if Q1 industry figures are to go by. Premiums for Q1 grew by 30.71% from UGX48.53 billion in Q1, 2018 to UGX63.43 billion in Q1, 2019. The industry on the other hand registered a 9.1% growth. Total industry premiums grew from UGX260.5 billion in Q1, 2018 to UGX284.12 billion in Q1, 2019.

  • Left - Right, Zephania Dube Chief Operations Officer, Arjun Mallik, Managing Director East Africa and Nashiba Nalubega, Marketing and Communications Manager of Prudential Uganda display a snapper frame with the amount of bonus that was accredited to Prudential clients' Policies at a Press conference held in Kampala on 7th May 2019 at Golden Tulip.

  • Left - Right, Zephania Dube Chief Operations Officer, Arjun Mallik, Managing Director East Africa and Nashiba Nalubega, Marketing and Communications Manager of Prudential Uganda at a press conference to announce a bonus that was accredited to Prudential clients' Policies. This was at a Press conference held in Kampala on 7th May 2019 at Golden Tulip. Prudential, is one of the latest players in the life business, after it acquired Goldstar Insurance’s life arm in 2016.

  • The insurance industry in Uganda in a snapshot. The industry is top-heavy with just 3 of 21 insurance firms - Jubilee, UAP and Sanlam controlling over 60% of the market

Kyamutetera is a senior journalist based in Kampala

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Finance

EXCLUSIVE: Oberthur, the French money printer named in BoU currency scandal is serving a 30-months World Bank ban over corruption

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SCANDAL AFTER SCANDAL: Bank of Uganda Governor, Professor Emmanuel Tumusiime Mutebile and his Deputy, Dr. Louis Kasekende have increasingly come under public scrutiny with scandal after scandal in the last 3 years- the latest being the mismanagement of currency printing with a possibility of several billions missing.

Oberthur Technologies SA (Oberthur), the French digital security company at the centre of what is now unfolding to be a currency printing scandal is serving a 2.5 year ban by the World Bank and its partner agencies over corruption related scandals.

According to a report by The Independent Magazine, in Kampala, it is Oberthur who chartered the Kuehne & Nagel cargo plane but failed to guarantee the contractual exclusivity owed to Bank of Uganda. Additional reports and police sources however, indicate investigations have now been widened to include printing of “non-official but genuine currency notes” which could only have been done, by Oberthur.

This further raises questions whether BoU did enough due diligence about Oberthur before awarding them the deal to print the country’s currency notes or if indeed BoU deliberately awarded the deal to Oberthur, well aware of their reputational gaps, which it sought to take advantage of.

Government spokesperson, Ofwono Opondo addresses media on June 14th regarding the BoU currency notes scandal. His version of events, has now come under question following a Uganda Police press conference today

According to investigations by CEO East Africa Magazine, under a deal reached in November 2017, with World Bank Group, Oberthur cannot participate in any World Bank funded project until May 2020, over what World Bank calls “corrupt and collusive practices under the Identification System for Enhancing Access to Services Project (IDEA), a project designed to establish a secure, accurate and reliable national ID system in the People’s Republic of Bangladesh.”

The sanction according to a November 30th 2017 statement from World Bank, was “part of a Negotiated Resolution Agreement (NRA) following the company’s acknowledgment of improper payments to a sub-contractor and collusive misconduct to obtain and modify bid specifications to narrow competition and secure the award of the contract.

Oberthur voluntarily acknowledged the misconduct and promised to “carry out corrective action, including an internal investigation, while holding individuals connected with the misconduct accountable,” according to the World Bank statement.

Under the terms of the NRA, Oberthur will not be eligible for any World Bank-financed contracts for the length of the sanction.  

The banning of Oberthur also disqualifies it from also participating in other projects funded by several Multilateral Development Banks (MDBs) party to the Agreement of Mutual Recognition of Debarments that was signed on April 9, 2010. 

Yann Delabrière the Idemia CEO. Idemia is the mother company of Oberthur, which is serving a 30 months ban from participating in World Bank funded projects over corruption.

The MDBs are: the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group and World Bank Group. The above MDBs are also members to the International Financial Institutions Anti-Corruption Task Force and the Uniform Framework for Preventing and Combating Fraud and Corruption.

Did Oberthur collude with BoU officials to print extra currency notes?

This discovery now raises serious reputation issues with the French firm, especially amidst, a Uganda Police statement, that police is now looking into allegations that there was unauthorised printing of currency notes.

The statement by Uganda Police spokesperson, Fred Enanga, sharply contrasts that made by the government spokesperson and Executive Director of the government’s Uganda Media Centre, Ofwono Opondo on June 14th 2019. Although Opondo confirmed there was a currency related investigation going on, he refuted media reports from an anonymous whistle-blower that UGX90 billion had been ordered, printed and imported into the country via the now infamous ‘money plane,’ and diverted by Bank of Uganda officials.

Lt. Col. Edith Nakalema, the head of the Statehouse Anti-Corruption Unit (ACU)

In a media interview yesterday, June 17th 2019 with Daily Monitor,  Lt. Col. Edith Nakalema, the head of the Statehouse Anti-Corruption Unit (ACU) also denied there was any money missing, only for Enanga to drop a bombshell- minutes later at a press conference. 

Enanga, told media that the case regarding what he called “irregularities surrounding a consignment of monies that were printed and the related supply chain” will now be “effectively supervised by the Director of Criminal investigations, i.e. AIGP Akullo Grace” who is “proceeding with lines of questioning on how the banking process supported the printing of the bank notes, whether there was any wrong doing on the part of the bank or not.”

He did not say why, Lt. Col. Edith Nakalema who was the initial lead person on the case has been removed from supervising the case.

Enanga said that several statements have been taken from “directors, managers and employees, with knowledge on the whole documentation process” with a view to “knowing how the need for the printing of the notes arose, who initiated the request, whether there was approval from the board, the amounts involved, serial numbers of the notes that were printed and how the none official but genuine notes could have arose.”

He hwoever did not mention much about the said “none-official but genuine notes.”

Some of the BoU officials from whom statements have been taken, according to Enanga, include the director for banking, director legal and auditors. Also additional statements were taken from ENHAS, Uganda Revenue Authority (URA) customs officials and that “further arrangements to get statements from lawyers of UN and the business persons mentioned in the story” were ongoing.

Uganda Police Spokesperson, Fred Enanga

Daily Monitor, a leading independent daily has now reported that that a police raid on the home of six senior officials of Bank of Uganda has “recovered documents which suggest printing of unauthorised notes.”

Mixed statements from government agencies: who is fooling who?

Since the scandal broke, there has been multiple statements from several arms of government involved in the scandal- either as suspects or investigators.

Lt. Col. Edith Nakalema’s State House Anti-Corruption Unit which made the first statement called it a “special investigation on a matter pertaining to the Bank’s procurement and supply chain activities” while a statement by Bank of Uganda Governor, issued hours after Nakalema’s called it “an anomaly in the inventory of the expected consignment.”

A few hours later, Ofwono Opondo, the government spokesperson, was on record saying there was no money missing as alleged by the initial whistle-blower, but rather, there as a case of unauthorised cargo on the supposed-to-be exclusive chartered currency plane.

The next day, Uganda Revenue Authority which had been severally mentioned in previous statements, issued a sharply worded statement of their own, saying that: “It is not the responsibility of URA customs to concern itself in logistical arrangements of importers or exporters” and urged Bank of Uganda not to drag URA into logistical contractual failures or mistakes of BOU and their service provider.”

Meanwhile, it was reported today on NBSTV that Bank of Uganda has rejected an apology from the owners of the plane that suspiciously carried unidentified cargo on a chartered flight by the Central Bank pending investigations into what went wrong.

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World Bank’s IFC considering USD70 million loan to Umeme

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The International Finance Corporation (IFC) the largest global development institution and a member of the World Bank Group, has reported, they are considering lending up to USD 70 million (UGX263.2 billion) to Umeme Limited.

Umeme workers carry out new installations. To date, Umeme has invested $627m (UGX2.4 trillion), but plans to invest USD450 million in capex over the next 6 years and up to USD1.5 billion in 10 years so as to create a robust enough distribution network to last the country for another 20 years. The planned IFC USD70 million is therefore a major boost.

Umeme is Uganda’s largest power distributor.

In a disclosure posted on their website, IFC said they plan to raise a senior loan for up to USD 30 million from IFC’s own account, and up to USD40 million to be mobilized from other lenders- altogether USD 70 million.

IFC said in the disclosure that the debt financing will be used to support “Umeme’s next 6-year (2019-2024) capital expenditure program, which will mainly focus on: network upgrades to enable load growth and additional connections to support uptake of new generation, safety/reliability enhancements, and implementation of smart meters to continue improving collections and reducing commercial losses.”

“The Project will support the growing demand for electricity in Uganda, and contribute to ongoing efforts to increase access to electricity. This will help fulfil the Government of Uganda’s efforts to improve electrification rate from the current 27% to 60% by 2027, and complement the significant growth (almost double) in generation capacity expected by 2020 (from 183MW Isimba and 600MW Karuma dams, and small solar/hydros),” said IFC in their disclosure.

“In addition, the Project has potentially significant indirect and induced effects on value added and employment as Umeme’s network expansion plan focuses on zones with high electricity demand and economic growth potential. Finally, it will improve resilience of the main distribution network in Uganda and reduce losses, through adoption of advanced smart technologies, adequate maintenance and upgrade of ageing assets,” added IFC.

IFC further said that by availing more affordable commercial and institutional financing, which is not readily available in the Ugandan market, Umeme will be enabled to “increase the average maturity of its loans and free up cash flow for Capex.”

President Museveni launches commercial operations of the Soroti Fruit Factory, on the outskirts of Soroti town recently. Uganda had reinvigorated her industrialisation strategy and is relying on reliable and stable power from Umeme and other distributors to power this drive. According to IFC, the USD70 million loan to Umeme will support the growing demand for electricity in Uganda, and contribute to ongoing efforts to increase access to electricity and directly and indirect induce jobs and economic growth.

“IFC’s involvement and proposed structure will also provide comfort to existing commercial lenders to potentially increase their commitment to Umeme,” said IFC.

This disclosure, coming at the same time as government’s confirmation last week that it will renew Umeme’s 20-year concession comes in handy and is a growing show of confidence in the power distributor.  

The financing, if approved will bring, the total amount of lending to Umeme by IFC to USD185 million over the last 10 years. Umeme, which has previously been hailed by the World Bank as “by far the most successful Public Private Partnership “in the previous past has attracted up to USD 265 million in funding from the International Finance Corporation (IFC), Standard Chartered Bank, and Stanbic. 

In a recent interview with CEO East Africa, Patrick Bitature the Umeme board chairman, said Umeme will need to invest up to USD450 million in capital expenditure (CAPEX) alone. He however added that to create a robust enough distribution network to last the country for over 20 years, Umeme will need to invest between USD1 billion and USD1.5 billion over the next  five to ten years.

To date, Umeme has invested $627m (UGX2.4 trillion) into doubling the distribution network to over 34,000km from the 16,000km it inherited and grown customer connections by more than 4 times- from the 290,000 inherited to 1,291,811 by end of 2018.

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BoU Currency Scandal- URA tells BOU: “Don’t drag us into your mess”

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Amidst the raging scandal in which the Statehouse anti-corruption unit is investigating how illegitimate cargo, found itself on a chartered plane carrying new BoU banknotes, the Ugadna Revenue Authority (URA) whose customs officials cleared the cargo have said they did nothing wrong and instead asked BoU to own up their mess.

Full statement by Dickson Kateshumbwa, the URA Commissioner Customs, in verbatim:

In April this year, URA Entebbe Customs was informed by BOU of an impending import of Currency and requested to facilitate quick clearance. A private chartered plane arrived and as normal practice for sensitive cargo Customs facilitated clearance of the currency at the tarmac in presence of BOU Officials, BOU Security, Aviation Security, Police and other security agencies.

The consignment was offloaded, inspected and loaded on BOU vehicles and taken to Kampala under heavy security escort.

The same plane contained other cargo which belonged to various individuals / companies / organizations. As per normal customs clearance procedure, this cargo was offloaded into the licensed bonds at the airport and subsequently the owners made customs declarations, paid applicable taxes and Customs physically verified each consignment to ascertain accuracy and consistency with the declaration and released the goods to the owners.

Each consignment had its individual airway bill. Customs was not party to the airline charter arrangements between BOU, the airline and the other owners of the goods. It is not the responsibility of Customs to concern itself in logistical arrangements of importers or exporters. Our duty is to ensure that imported cargo through the airport is received and tallied with the cargo manifest, verified and is cleared in line with the Customs Laws as established under the East African Customs Management Act (EACCMA).

In this particular consignment like all others, our Customs staff followed the procedures to the dot and we can account for the cargo cleared fully. URA has provided the details of the information required by the investigators and we are available to offer any clarification if required.  

URA should not be dragged into logistical contractual failures or mistakes of BOU and their service provider.

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