Fairfax Financial Holdings, a Canadian-based investment holdings business with predominantly insurance and reinsurance assets, says it has $500m to deploy in Africa.
The group, listed on the Toronto Stock Exchange and led by billionaire Prem Watsa, is also bullish on SA.
“We happen to be really quite optimistic about SA. We take a long-term view and we believe SA is uniquely positioned,” said Mark Cloutier, a Fairfax representative and incoming chairman of Bryte Insurance, formerly Zurich Insurance Company SA.
Fairfax raised the $500m in equity capital (housed under Fairfax Africa) via an initial public offer for subordinate voting shares, private placements and a commitment from its parent, Fairfax Financial.
Fairfax Africa would seek investments with a view to acquiring control or significant positions of influence, the group said. Its investment objective was to achieve long-term capital growth by investing in debt and equity instruments of businesses primarily conducted in Africa, it said.
Fairfax bought Bryte Insurance, the new brand of Zurich Insurance in SA and Botswana, from the Zurich Insurance Group in 2016 for R1.8bn. Also in SA, Fairfax has bought a 7.15% stake in reinsurer Africa Re and a 50% stake in specialist liability underwriter Camargue, through another of its subsidiaries, Brit Insurance.
Fairfax made its first investment in the country in 2014, when AgriGroupe Investments, in which it is the largest investor, acquired a 60% stake in agricultural and foods group Afgri.
Cloutier, who is executive chairman of Brit, said Fairfax was in “early-stage discussions” with two private insurance businesses in SA.
There was significant growth potential for insurance in the country as the transformation agenda progressed, he said.
Short-term insurers have struggled to grow premium income in a country with economic growth below 1%.
But Cloutier said the country would resemble other emerging markets from a demand standpoint, as people increasingly acquired assets that needed to be insured.
SA had a strong culture of insuring valuable assets, which was not the case in all countries, he said.
“We continue to make investments in SA and explore opportunities in the insurance and reinsurance worlds,” Cloutier said.
Watsa founded Fairfax in 1985, earning net insurance premiums of $10m that year. In 2015, it earned net premium income of $7.5bn.
Fairfax’s net earnings amounted to $642m in 2015, a 61% decline on the previous year due to larger losses from claims. Figures from September 2016 indicate that the company has a $44bn balance sheet.
Watsa — referred to as “Canada’s Warren Buffett” by the likes of Forbes, Irish Times and Financial Post — is adept in financial markets. He sold nearly $5bn in US Treasury bonds ahead of that country’s recent election, saving a lot of money, Forbes reported, as bond prices fell sharply on the news of Donald Trump’s election.
Giving Bryte its independence and “putting Fairfax’s financial strength behind it” would give the company an advantage in SA, Cloutier said.