By Staff Reporter
First Mutual Holdings acquisition of a controlling stake in Nicoz Diamond Insurance will result in its merger with Tristar.
Tristar is a subsidiary of FML and like Nicoz its focus is on short term insurance.
FML holdings CEO Douglas Hoto said the merger was likely to be concluded by half year.
“Nicoz and Tristar are in the same business and we are going to merger them and delist Nicoz from the stock exchange. We now have 81 percent of Nicoz and we have made the mandatory approach to the remaining minorities. The merger of the two will create the biggest short term insurance entity in the country,” said Hoto
An analyst who spoke on condition of anonymity said while the deal was motivated by need to cut costs and create a bigger portfolio it had the potential to stifle growth in the sector.
“While appreciating that the deal is probably partly motivated by the need to cut costs and create a bigger and powerful portfolio than can accrue economies of scale, what worries is how it tends to kill competition in the market, reinforce the ugly side of the oligopoly market probably discourage innovation. The consumer should be the winner in all this by getting a wider choice and well priced insurance products, which is not a given in this deal,” said the analyst.
He added the will translate in a stronger and well capitalized institution but beyond that it reduces choice and motivation to compete.
“I doubt it will make any significant change to market share in the short run, but it might leave stakeholders in a wait and see stance as they build a new perspective on this new creature. For small insurance firms, the success of the merger may pull away clients from them and they should focus on more innovative offerings taking advantage of the limitations of giants”.