Get ready to rumble!
GRACEKENNEDY LIMITED and Musson Jamaica, two of Jamaica’s largest conglomerates in control of multiple companies, will initially look to their own networks for business to feed the new life insurance company on which they have teamed up.
Insurance is not a new business line for either group, but they mainly own operations in the general insurance sector -- GK General Insurance and General Accident Insurance Company, respectively. They will now tackle
the larger life insurance and group health market through Canopy, a joint venture in which they each hold a 50 per cent stake.
Canopy is expected to begin operations in the second half of this year under the leadership of Sean Scott, who was previously responsible for strategy and development at beverage maker Wisynco Group.
In an interview with the
Financial Gleaner, Scott said that alongside GK and Musson’s track record in general insurance, GraceKennedy was an early partner in health insurance business Medecus in the early 2000s but later sold out to Guardian Life; and that Canopy’s board, which is to be chaired by GK Group CEO Don Wehby, will also include insurance professionals such as Grace Burnett of GK General and Sharon Donaldson of General Accident.
Canopy is entering a market in which Sagicor Group Jamaica is dominant, and most of the rest is controlled by Guardian Life Limited. The other life insurance company is owned by banking conglomerate NCB Financial Group.
Life insurance companies represent 80 per cent of the entire insurance sector. Industry figures published by regulator, the Financial Services Commission, up to March 2018, valued the life sector at $316.2 billion by total assets. Quarterly revenue for the same period topped $21 billion.
Sagicor Group, which is a listed company and the largest player in the market, reported $9.3 billion of net premium income in the same quarter, and net premium income of $40 billion for all of 2018.
Scott said the GK-Musson partnership evolved after both entities analysed the value and service they were receiving as clients of the existing life insurance operators against the size of the premiums they pay annually to provide health and life insurance to their own employees.
“Our research showed a large market that was underpenetrated and underserved. We saw this as an interesting investment opportunity with both the Jamaican broker community and the country’s employers longing for greater choice and a more modern approach to health insurance administration, particularly,” said Sean Scott.
The company intends to build out its group health operation before tackling the wider life segment, but Scott declined to comment on the targets set by Canopy, and its level of capitalisation.
Limited impact
With reference to the plans by the two conglomerates to shift their health insurance coverage to Canopy, Sagicor Group Jamaica, which controls 67 per cent of the group health market, says the migration of that business will have limited impact.
“We provide a very small proportion of the group health insurance to these companies. The revenue and profit loss from losing what group health business we now do with these two groups is not at all significant,” said Sagicor Group President & CEO Christopher Zacca.
Guardian Life is more exposed,
industry insiders say, as it insures both GraceKennedy and Musson. Musson Group’s businesses span a multiplicity of sectors including food distribution, document services, insurance and real estate. GraceKennedy is a food and financial services conglomerate.
Guardian Life President & CEO Eric Hosin did not speak directly to the Financial Gleaner for this story but said, through his communications department, that the company now holds about 35 per cent of the group health market.
But as to the amount of business Guardian would lose initially to Canopy, the short answer was: “Don’t know”.
Canopy’s market entrance comes as NCB Financial Group is finalising its takeover of regional insurance giant Guardian Holdings Limited, which is the parent company for Guardian Life. It means that Guardian Life will have a new ultimate parent in NCB Financial Group, a larger outfit than GraceKennedy that can be leveraged for new business.
Musson Group is privately held and its finances are unknown, but GraceKennedy has a net book value or net worth of $45 billion; while NCB’s net worth is three times that at $130 billion. NCB’s takeover of Guardian Holdings will also give it 62 per cent of the regional insurer, whose net value is more than TT$3.4 billion ($68 billion), when that transaction closes.
“Across both groups of companies we have in the past, and currently, insure with both players,” said Scott.
But now: “We hope to leverage the vast corporate relationships of both shareholders to aid our business development,” he confirmed.
As to whether the services will extend in any way to the operations of the conglomerates’ overseas businesses, Scott said the Jamaican market was the only area he could speak to definitively at this time.
The joint venture was initially to be called GKMusson Limited, but the name was changed to Canopy Insurance Limited to comply with regulatory requirements, GraceKennedy said in a market filing.
Scott, who holds an MBA from Harvard University and is no relation to Musson Group CEO Paul Scott, started his career as a management consultant and has held leadership roles spanning strategy, operations, finance, and mergers and acquisitions. He has sat on the board of an insurance company but has no known management experience in the insurance sector.
“I have experience turning around loss-making entities, scaling mid-stage businesses, as well as operating large firms across a wide range of industries, most recently as part of the senior executive of Wisynco,” he said.
“My particular passion lies in identifying unmet consumer needs, improving operational efficiencies, and building sustainable solutions at the intersection of technology and customer care – all skills relevant to the current needs of the group insurance marketplace. I sat on the board of directors of one of Jamaica’s leading group health and life insurance brokers, Fraser Fontaine Kong, for several years, which provided me with important insight into the industry, that I know will serve me well in this role,” the Canopy CEO said.
He adds that the team being built at Canopy includes several long-standing insurance veterans.