25537 - Madison Insuranc

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Summary of Proposed Investment

Project Number

25537

Company Name

MADISON FINANCIAL SERVICES PLC

Date SPI Disclosed

Nov 13, 2006

Country

Zambia

Industry

Financial Markets

Projected Board Date

Dec 28, 2006

Status

Completed

Sector

Composite Insurance (Life and Non-life)

Department

Regional Industry - FIG Africa

Environmental Category

C - No Impact

Previous Events

Approved : Nov 29, 2007
Signed : Dec 3, 2007
Invested : Jan 17, 2008

Project Description

Lawrence Sikutwa & Associates, trading as Madison Insurance Group (Madison Group, or the Group or the company), was established in 1994 to hold and represent shareholding interest of management in Madison Insurance Company following the liquidation of Meridien International Bank, which was a holding company for Madison Insurance Company Limited. Following the amendment of the Insurance Act in December 2005 to enforce a segregation of operation between life insurance and non-life insurance underwriting, Madison Insurance Company Limited was split into two business entities namely: Madison General Insurance Company (Zambia) Limited and Madison Life Insurance Company (Zambia) Limited. The Group has also expanded to include Madison Investment Company Limited and Madison Health Solutions Limited.

The project consists of an equity investment of up to $2 million for a shareholding of up to 15% (IFC Equity Investment) and a senior loan of up to $3 million (IFC Loan) to the Group. Madison Group is the leading insurance group in Zambia. The project’s main objective is to strengthen and expand the operational capacity of Madison Group in Zambia. The proposed investment allows IFC to:
- support mid-tier local insurance groups in the African region both through financial and non-financial assistance;
- support the Group with its strategy of expanding its activities into property development and mortgage financing through its subsidiary Madison Investment Company Limited.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	5.0
Equity	2.0

Development Impact

The potential developmental, institutional and capacity building impact of the project is high. The capitalization proposed for Madison will help reinforce the local insurance industry in Zambia and help the company better compete with foreign based insurers in the local and regional markets. This will in turn reduce the amount of capital leaving the country for the accounts of non-Zambian insurers.

IFC''s investment will help in the transformation of an existing local institution into a strong and viable private sector entity that will attract other foreign players into the Zambian insurance industry. The investment will have an important demonstration effect in that it will result in an increase in the overall market size of private insurance in the country.

Insurance companies have a disproportionately high impact on economies because they are necessarily large investors who directly affect the general economy through their operations. In order to settle claims that may arise, insurers invest excess premium income to build a portfolio of financial assets and income-producing real estate which can then be called upon to pay off any future claims that arise. A vibrant insurance industry can be a reliable source of long-term capital, which is lacking in Zambia as well as in many African countries. The provision of quality insurance is therefore crucial for the development of a healthy and dynamic private sector and long-term capital markets.

IFC has a number of important roles in this project which include:

- IFC will invest equity for its own account and this will help to stimulate confidence into the local financial and insurance market. Supporting the development of a strong insurance sector in Zambia by IFC, will introduce greater discipline, professionalism and more effective pricing structure for the Zambian market;

- Contributing to the strengthening of Zambia’s financial markets by increasing the capitalization of one the country’s largest private insurers, thus enabling it to increase its retentions and limit the outflow of foreign exchange;

- Supporting and developing a stronger insurance industry encourages risk mitigation, adequate insurance protection for businesses and individuals, and safer industrial practices through a wider use of insurance. This project is also in keeping with IFC’s mission of being a pioneer and proactively engaging in the development of African financial markets.

Contacts

For Inquiries About the Project, Contact

Mr. Rhoydie Chisanga, Managing Director
Madison Insurance Group

Telephone: 260 (01) 295 311-17
Fax: 260 (01) 295 320 / 295 527
E-mail: chisanga@madison.co.zm
Website: www.madison.co.zm

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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