Germany’s DEG plans reentering Pakistan, eyes stake in TPL

KARACHI: DEG, a unit of German state development bank KfW, has expressed intention to acquire stake in a Pakistani insurance company TPL Insurance for an undisclosed sum, it was learnt on Tuesday.

TPL Insurance, the country’s first direct insurance company, signed a letter of interest with DEG, Deutsche Investitions- und Entwicklungsgesellschaft mbH, according to a filing with the stock exchange.

The proposed transaction of an acquisition of a minimum 20 percent equity in TPL Insurance will be executed subject to approval of the board of directors, shareholders, Securities and Exchange Commission of Pakistan and other regulatory bodies.

Pakistan has a low insurance penetration – less than one percent of GDP – due to lack of awareness and education regarding the benefits and importance of the insurance as well as the religious concerns of the populace.

In contrast, insurance penetration in India, Russia, Brazil, and South Africa is 3.6 percent, 1.4 percent, 3.1 percent, and 13.9 percent, respectively, in recent years, according to the State Bank of Pakistan.

However, DEG is reentering the Pakistani market to capitalise on business opportunities amid the coronavirus with insurance needs likely to increase to shield from potential dangers.

“This is the beginning of a promising future for our organisation. DEG, with a portfolio of EUR 8.6 billion and a geographic presence in over 80 countries, finances enterprises that focus on lasting success and operate responsibly – just as we do,” said Muhammad Aminuddin, chief executive officer of TPL Insurance. “Our partnership with DEG will not only bring growth and prosperity for Pakistan, but also tell a story about TPL’s commitment to growth and our mission to provide unmatched service and product innovations to create sustainable value for our stakeholders.”

TPL Insurance is comparatively a small company. It is engaged in both general insurance and Takaful.

The SBP said the insurance industry in Pakistan was exposed to concentration risk. In terms of asset size, although the dominant public life insurer’s market share had gone down, it constituted more than 60 percent of the industry.

The top five life insurers—in terms of asset size—comprised more than 99 percent of total assets and total gross premiums of life sector, respectively. In case of non-life sector, the top five insurers—in terms of asset size— constituted more than 68 percent of total assets and 65 percent of total gross premiums. The concentration of the non-life sector would be even higher if the public non-life insurer was included in the analysis.

Overall, the insurance industry witnessed a decline in profitability to Rs14.5 billion for the period ended September 30, 2019 from Rs15.9 billion for the period ended September 30, 2018.