After banking bonanza, now Equity eyes insurance riches

Equity Group CEO Dr James Mwangi. [Wilberforce Okwiri, Standard]

In early 1994, Equity Building Society was teetering on the verge of collapse after being found to be technically insolvent by the Central Bank of Kenya (CBK).

Between 1986 and 1993, Equity grew savings by only Sh2 million and loans and advances increased by Sh5 million.

By 1993, slightly over half of the lender’s loans were non-performing. It had accumulated losses amounting to Sh33million.

One report noted that “deposits were being used to meet operating expenses and the liquidity ratio stood at 5.8 per cent, way below the regulatory threshold of 20 per cent.

It was, therefore, not surprising when in 1994, the Water Ministry, one of the three depositors that accounted for 85 per cent of Equity’s total deposits, sued for the liquidation of the lender.

But today, Equity Group (which owns the successor to Equity Building Society), is one of the largest companies in Kenya with a total asset value of Sh1.23 trillion.

And last week, the company added yet another subsidiary to its stable after the Insurance Regulatory Authority (IRA) gave it the licence to operate a life assurance company.

Equity Life Assurance Kenya (Elak) is fully owned through Equity Group Insurance Holdings.

It is yet another clear sign that the James Mwangi-led company is intent on transforming itself into a corporate behemoth with its tentacles permeating virtually all sectors of the economy.

Mwangi said Elak would target all customer categories. 

“We realised that the greatest threat to wealth creation is when disaster strikes and the family and entities have no fall-back plan except removing capital from their businesses to meet such expenses,” said Mwangi.

Equity joins a highly concentrated market,  with IRA data showing that out of the 24 firms carrying out life insurance, six—Britam, ICEA Lion, Jubilee, Kenindia, Sanlam and CIC—commanded 69.9 per cent market share by September 2021.

Equity hopes to leverage its more than 10 million customers to offer other services besides its core financial services business.

It is the same thing that informed the lender’s entry into telecommunications space a few years ago, launching a thin SIM card, Equitel, in conjunction with Airtel, a telecommunications provider. It owns a digital technology company known as Finserve.

The group is also into healthcare and runs the Afia franchise of medical outpatient centres.

And before it got into insurance proper, Equity was into bancassurance, acting as an intermediary between customers and underwriting companies.

Equity has operations in six regional countries—Uganda, Democratic Republic of Congo, Tanzania, Rwanda, and Burundi.

Safaricom is another local company that has diversified its operations to other sectors, including financial services, wealth management, healthcare, and insurance.

The telco, which is the region’s most profitable company, has set its eyes on transforming into a global financial giant, with M-Pesa, a mobile money service, at the heart of the telco’s next chapter. 

“Our vision is to be a purpose-led technology company by 2025,” new CEO Peter Ndegwa told investors recently.

With a market capitalisation of Sh186.8 billion at the Nairobi Securities Exchange (NSE), Equity’s counter is the second-biggest after Safaricom.

Safaricom’s total wealth at the NSE is Sh1.5 trillion. Equity Group is the most profitable financial service provider, recording an after-tax profit of Sh26.8 billion in the first nine months last year.

Locally, Equity Bank-Kenya was the second-largest bank in asset size behind KCB Kenya.