LeapFrog sells stake in Kenya's Apollo

Buyer Swiss Re is also an LP in LeapFrog's recently-closed second fund

LeapFrog Investments, a private equity firm that specialises in 'profit with purpose' investing, has secured its second exit, selling its minority stake in East African insurer Apollo Investments to Swiss Re.

Financial terms of the deal were not disclosed. The firm declined to comment on its return.

Apollo is one of the top three insurers in East Africa, operating out of Kenya, Uganda and Tanzania and selling various types of policies, from motor to crop insurance. LeapFrog, which focuses on investing in emerging markets financial services business, particularly in the insurance space, initially bought a stake in the business in April 2011. It then made a further investment the following year, committing a total of $13.1 million to the transaction.

Speaking to Private Equity International today, LeapFrog founder and CEO Dr. Andy Kuper said that LeapFrog had been able to support “an enormous amount of change” within the business. The insurer now has about 220,000 customers, which assuming that the average policy covers five or more people, means that it's now insuring over one million people. Around three-quarters of these are classified by LeapFrog as 'underserved', meaning that they have previously had limited access to financial services.

Kuper said that LeapFrog had received a number of approaches from parties interested in the stake, but decided that Swiss Re – which is also a limited partner in the firm's new fund – was “right for LeapFrog, right for Apollo and right for Africa.”

“LeapFrog provided more than capital,” Apollo CEO Ashok Shah said in a statement to be released today. “The team helped us to scale our substantial health insurance offerings [and] launch a number of products for under-served clients. These innovations will be crucial not just for Apollo, but for regional development.”

This is LeapFrog's second exit from its first fund. Earlier this year it sold its stake in Ghanaian insurer Express Life to UK-listed insurance giant Prudential, also for an undisclosed sum.

The firm recently closed its oversubscribed second fund with $400 million of commitments. The firm says it has earmarked up to $100 million of this to invest in East Africa, which it described as “an increasingly attractive investment destination”.

Kuper pointed out that financial services in sub-Saharan Africa is growing at about 19 percent annually, according to recent figures, and East Africa is a particularly strong performer within that. “If you think that we're then picking out the high performers in East Africa, you get a sense of the scale of the potential, and why we're so excited about the region.”