Mobile operator MTN and insurer Momentum Metropolitan Holdings (MMH) plan to launch their microinsurance joint venture in Ivory Coast and Nigeria as they seek to capitalise on African countries with low insurance penetration.
MTN has been on a strong push in recent years to diversify its business, pursuing new revenue streams in mobile data, technology and related communications services to businesses, wholesale network services, fintech and digital services.
aYo is a microinsurance fintech operator, run jointly between MTN and MMH, with operations in Ghana, Uganda and Zambia.
Having started aYo as a 50-50 partnership, MMH recently took its stake down to 25%, while MTN now holds 75%, pending certain conditions.
The partnership piggybacks on MTN’s mobile and distribution networks in its operating countries, while using MMH’s insurance expertise.
With the start-up recently breaking through the 10-million customer mark, its CEO Marius Botha told Business Day they are looking to launch their service in Ivory Coast in March. Once done, the fintech company has plans to enter the Nigerian market, but that move is “pending regulatory approval”, Botha said.
Being a microinsurance player, premiums paid tend to be small and are funded through customer airtime and mobile wallets. The business is therefore chasing scale, signing up as many users as possible to become profitable.
aYo offers two main insurance products — life and hospital cover — depending on the country.
At a time when MTN’s rival, Vodacom, has invested heavily in its insurance business locally, Botha says they are more focused on those countries that have low insurance penetration, which takes SA out of the running as an immediate priority.
“We try and focus on the countries in Africa that have a very low insurance penetration. That’s because we want to have a reasonable probability of success in a market aiming to reach millions of customers in order for the business model to work,” he said. “SA is on the road map, but we’re prioritising the other countries.”
MTN has been looking at introducing insurance products in SA.
In 2019, it announced a plan to offer life insurance products in partnership with Sanlam. At the time, the two listed companies said they would work together to target people who do not have insurance as MTN tries to grow its financial services revenue and Sanlam looks to expand into Africa.
Given its population of about 112-million and largely informal economy, Ethiopia might seem like the perfect candidate country for the joint venture, but Botha said this was not an option at the moment as MTN does not have operations there. aYo is following a strategy of opening up in countries MTN is in — the reason Ivory Coast and Nigeria are on the cards.
For the first quarter of the 2021 financial year, MMH said aYo narrowed its losses to R13m, from R32m in the previous comparative period.
“Outside of the core technology stack that requires continuous investment, we invest upfront in each new market we roll out to. We are starting to see some of our existing country subsidiaries moving into profitability, but recently launched markets or those we are still gearing up for launch require investment,” said Botha.
Unlike other insurers that saw claims rising due to increasing Covid-19 infections over the last year, Botha said they had not been affected as much given that their cover is mainly for accidents.
Update: January 21 2020
This article has been updated to reflect that MTN's additional 25% stake in aYo is pending further conditions
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