Businesses & Financial News

Peter Nduati’s dilemma

By Steve Umidha

Peter Nduati’s 20 year reign as head and founder of Resolution Insurance has ended in ignominy after industry regulator, the Insurance Regulatory Authority (IRA) three weeks ago placed the insurer under statutory management on failed rescue missions.

For several months, the country’s once touted insurance poster boy has been weighed down by a slew of business transactions that were either mistimed or not well thought out, in what has condemned both the firm’s status and that of its founder to negative publicity.

But according to people with direct knowledge of the situation, it now seems impossible for the father of four to bring back to life a company he worked tirelessly to build after four failed businesses prior to establishing the brand that once threatened to take on the likes of AAR insurance and UAP Old Mutual group regarded as ‘big cheese’ in the market.

He however, remains active and highly successful in other business segments where he has interests, including Trueblaq Group – an experiential marketing company, Absolute Security and Centric Air Ambulance as well as horse breeding business from where he fetches in excess of Sh3million the a sale of one horse.

According to details available on the Rotary Club of Nairobi East (RCNE) website, fondly known as the ‘Coolest Club in town’, Mr. Nduati is said to own at least 9 horses – an investment he commended Africans to tap into when he gave a talk at the rotary club in July 2019.

A serial entrepreneur by his standards, Nduati was conspicuously asked while giving a lecture at the rotatory, to offer his opinion on ‘private equity’ – which is typically an alternative form of private financing, away from public markets, in which funds and investors directly invest in companies or engage in buyouts of such companies.

To which he answered. “You need patient capital as your business grows. With Private Equity, just as the business has started to grow steadily, they are already seeking to exit. Seek private equity only when the business really needs it. At the growth stage of the business, you may need private equity but at the maturity stage, you don’t actually need private equity.

It is a remark the alumni of India’s Punjabi University would later come to rue three years later following decisive missteps he together with the company’s board and management gambled on in an effort to propel the brand to a top-tier industry player when he spearheaded the company’s second equity financing deal with a UK-based Insurance firm, Linkham Group.

The firm fully acquired 100 per cent interest held in the group by LeapFrog Investments for an undisclosed amount, in a deal flagged by the Competition Authority and given the green light by the IRA in July 2021.

The deal – the second largest financing contract under Nduati’s watch would later experience ‘significant delays’ owing to what insiders blamed on macroeconomic challenges from the Coronavirus pandemic that exposed it to heavy working capital restraints.

The firm had hoped to finalize on capital raising and take immediate measures to normalise operations, but the acquisition process of a majority stake in the firm hit the company’s capital, as a number of hospitals shun its health covers.

Today, Nduati – a man credited with founding the country’s top artistes such as Mr. Lenny, Sheila Mwanyigha (Nikki), Atemi, Didge, Anto Neo Soul, Lady Jay Dee among others through his Pine Creek Records, is embroiled in a vicious court battle over a Sh 692 Million, which he claims his partners, Linkham Group, failed to pay after acquiring shares in the insurer.

He is accusing the firm for breaching a share purchase contract it signed in 2020 in return for a 55 percent shareholding in Resolution in a deal then valued at Sh691million.

Nduati is also blaming the company for the current state of affairs with Resolution – whose future survival appears slim.

Resolution Insurance – probably Nduati’s most successful business empire yet, was found unfit to continue operating due to lack of financial soundness, attracting the attention of industry watchdog for a company that reached dramatic heights only to face a dizzying fall.

As a result industry experts admit that, “the impact is there in the sector,” and that the situation with Resolution Insurance has created the need to increase credibility gap in the industry.

The Association of Kenya Insurers (AKI) Chief executive Tom Gichuhi yesterday while weighing in on the matter, said the firm, placed under the statutory management to safeguard policyholders will have to undergo a one-year proper assessment by the regulator and other relevant bodies who will rely on various fiscal and legal decisions to determine the firm’s revival or a complete folding up.

“But that would depend on many factors,” cautioned Gichuhi.

The Policyholders Compensation Fund (PCF) was appointed Resolution’s statutory manager for a period of 12 months effective Tuesday April 5, a decision that came barely a week after Resolution Insurance suspended issuance of non-medical covers for 90 days.

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