A big Leap forward

When Leapfrog Investments bought into Ghanaian insurer Express Life in the third quarter of 2012, the company was using an IT operating system that had about the same processing power as a BlackBerry, LeapFrog partner Doug Lacey recalls.

That was just one of a series of issues discovered by LeapFrog – which specialises in what it calls ‘profit with purpose’ investing, combining social impact with financial returns – when it took a 70 percent stake in the company in 2012, investing $5.5 million.

Just over a year later, the firm was able to sell its position to UK-listed Prudential, one of the world’s biggest insurers – in a deal that generated an internal rate of return of about 80 percent, according to a source.

Leapfrog declined to comment on the financial details of the transaction. But the firm can certainly point to some impressive growth figures from its entry to its exit. Revenue for the third quarter of 2013 was up 280 percent year-on-year, from $229,000 to $874,000, while it increased employee numbers from 68 to 248.

So although the holding period turned out to be much shorter than LeapFrog intended and expected (which did admittedly lead to that impressive IRR), it was clearly able to push through a lot of operational improvement in that short time. These were perhaps the four key areas:



Finding good management in emerging Africa is notoriously difficult, and LeapFrog felt Express Life’s existing team would have been unable to drive the business through its next stage of growth.

“The first thing we did post-investment was to recruit a new management team,” Lacey explains. “The calibre of the management team was just not of the standard that we needed to take the business forward. They didn’t have the skills, expertise or experience to run the business in line with the aspirations that we had as investors.”

Happily, Lacey had previously invested in Ghana’s leading insurance company, where he helped to bring in a strong management team. So he went back and poached them for Express Life.

“We were able to entice four of their senior management team to come and join us. Once we had those people on board, it changed the whole profile of the company; with our capital and the new management team, it made Express [more attractive] and enabled us to recruit further staff of the right calibre.”

LeapFrog then embarked on a period of detailed strategic planning with the new team; this included identifying Express’ target market and the steps it needed to take to reach its customer base. 

Moreover, the firm implemented a higher standard of governance and scrutiny at board level.

“We brought on appropriately qualified, independent non-executive directors; we set up the right sub-committees; we put in place terms of reference for the board and sub-committees; and we started ensuring that the board was meeting on a regular basis quarterly, which was not happening prior to our investment.”



Having discovered a back-end system that was well below par, LeapFrog sourced a new IT services vendor for Express out of Kenya that it had previously used for another portfolio company.

The firm had already done significant due diligence on the business, called Turn Key, so it already knew the capabilities of the system and the team.

Turn Key now provides Express with a system that allows the company to bill for insurance premiums, allocate premiums, make changes to policies, pay claims, do annual valuations and produce financial statements.

“[The two systems were] like chalk and cheese. The guy that did the due diligence said that the previous IT system had the computing power that my BlackBerry has. Now we’ve provided them with a far more sophisticated hardware infrastructure. The system is just way more advanced.”




During its holding period, LeapFrog grew Express’ agency force six-fold and increased its number of branches from just three to eight – allowing the firm to put insurance agents in more remote areas of the country, and thus reach a broader range of customers.

The increase in geographical coverage was a critical step, since insurance policies tend to be sold in person, rather than online – not surprising in a country that lacks a sophisticated internet infrastructure.

“When you look at Africa, you need a physical presence on the ground. There is a lot of emphasis placed on [having] a bricks-and-mortar store. While internet penetration is increasing all the time in Africa, insurance is primarily sold rather than bought.”

LeapFrog also introduced a meticulous reporting system to track Express’ activities.

“We implemented a new management reporting system, where they were required to report on a monthly basis all the key indicators that you’d expect to be tracked in an insurance business, but weren’t being by the previous management,” Lacey says.

This system tracked the number of agents and their productivity relative to budget, as well as how many sales converted into premium paying insurance policies, customer service issues, and insurance claims’ turnaround times.



According to Lacey, there is still a lack of understanding or awareness of insurance in Africa. “You need the agency force to be out there the whole time interacting with people. So the website, like you would be seeing in developed markets, is still not yet a major distribution channel in Africa.”

Lacey emphasises the importance of training staff; agents needed to be well-educated about the products they are offering to consumers. That meant implementing training programmes both for new and existing employees.

“Our starting point was to spend more time ensuring the new agents we recruited were adequately trained in terms of ethical selling and the quality of the sales process. We invested, by Ghana standards, a significant amount of money to make sure that for new products, the policy wording was a lot clearer, simpler and easier to understand.”

Leapfrog brought in an external trainer with significant experience training entry-level agents in markets such as South Africa. He developed a detailed programme that covered agents and managers, who were recruited in batches. The trainer would spend three days in each branch with new recruits, taking them through the agreed training format.


LeapFrog had initially just planned to sell a minority stake in Express, having worked with a local partner who wasn’t adding much value to the business. However, events took an unexpected turn after it started talking to UK-listed Prudential.

“They expressed an interest in the business; their starting point was to consider a minority stake, [but] after due diligence they said [they] wanted 100 percent of the business.”

With the firm in the midst of raising the new $400 million fund (which reached a first close in December on $204 million), sealing an exit seemed an appealing option, Lacey explains.

“The money in and out multiples were very strong, as was the IRR, and we had already met our targets. We said we wanted to reach 500,000 Ghanaians over the course of our investment and we had [already] reached 730,000 Ghanaians at the time of exit. So we’d hit our social objective.”