Global insurance giant Prudential has poured $US350 million ($500.6 million) into LeapFrog Investments, a fund focused on selling financial services in Africa and Asia especially via mobile phones.
LeapFrog is a private equity and alternative investments manager with a portfolio in insurance and the burgeoning financial services technology, or “fintech”, space. The fund is domiciled in Mauritius, but led by co-founder and chief executive Andy Kuper from a small office in Sydney.
The Prudential deal means LeapFrog has raised a total of $US1.09 billion ($1.55 billion) since it was started seven years ago by Dr Kuper and his business partner Jim Roth.
Backed by big names such as US billionaire fund manager George Soros and eBay co-founder Pierre Omidyar and major global insurance companies, LeapFrog has also started to attract investment from Australian superannuation funds.
The funds are invested in a portfolio of companies, some owned outright, with a tight focus on the mobile distribution of financial services such as insurance and healthcare in emerging markets.
“We take capital from developed markets into emerging ones, and bring back insights for our investors about the innovation happening there,” Dr Kuper said.
The firm employs 50 people across six international offices. Eight staff, including local partner Stephen Bowey, are housed in modest digs above the Bondi Junction outlet of Domino’s Pizza.
Prudential, a $US30.59 billion United States asset management giant with $US1 trillion on its books, informed the New York Stock Exchange on Friday of its $US350 million investment in LeapFrog.
Prudential hopes to leverage the smaller company’s success in emerging markets in Africa, with the partnership to target investments in life insurance companies in Ghana, Kenya and Nigeria.
‘Profit with purpose’
“This investment expands Prudential’s footprint into Africa, a continent we believe offers tremendous potential for growth over the long term,” Prudential chief operating officer of international businesses, Charles Lowrey, said.
“We are delighted to partner with LeapFrog Investments, given their deep experience in Africa, and their impressive record of success as insurance investors focused on emerging consumers.”
The significant investment from Prudential is a major milestone for LeapFrog, which launched in September 2008, one week after US investment bank Lehman Brothers collapsed, sparking a global financial meltdown.
“Not the best time to be pioneering a new strategy, let alone in emerging markets,” Dr Kuper said. “A year later, after we raised the first $US44 million, almost everyone was surprised it had worked.”
The timing of the launch may have been bad but the guest speaker, former US president Bill Clinton, who is a supporter of the venture’s “profit with purpose” philosophy, probably helped.
Original investors included Soros, Omidyar and investment bank JP Morgan, and all three remain invested.
LeapFrog touts itself as a business that measures its success with reference to both its financial results and social impact.
Dr Kuper said the number of people living on less than $US10 a day reached and served by the businesses LeapFrog invests in was a marker of the firm’s positive contribution to developing economies.
“These people profoundly need quality financial tools and healthcare that are also affordable,” he said.
“We reach 51.8 million people, of whom 36 million live on under ten bucks a day.”
Telstra, big four banks in sights
LeapFrog’s portfolio companies, including those it owned outright or had significant stakes in, employed about 94,000 people, according to Dr Kuper.
Some of the biggest insurance companies in the world are major investors, notably AXA, Swisse Re, Zurich, AIG and Prudential.
Other backers include development finance institutions, such as the US Overseas Private Investment Corporation, the European Investment Bank and the International Finance Corporation.
Local superannuation funds HESTA and Christian Super took a stake in September 2014.
“Australia is a strong capital market and we hope to build more partnerships here in the coming years,” Dr Kuper said.
Some of the largest companies on the Australian Securities Exchange have stated they want to further their own investments and partnerships in the fintech sector.
Dr Kuper said he has discussed opportunities with the big four domestic banks as well as Telstra, and is optimistic they may do deals in the future.
“They and major Australian insurers could be natural acquirers of some of our assets, or we may acquire assets from them, over time.”
LeapFrog’s two most prominent fintech assets are BIMA Mobile, a mobile platform for health and financial services providers in emerging markets across Asia and Africa, and JUMO, a mobile marketplace that delivers more than 1 million small loans a month in Africa.
South African-born Dr Kuper became a local citizen after moving to the country seven years ago with his Australian wife.
Andrew Rothery, the co-founder and former executive chairman of one of the country’s largest homegrown private equity firms, Archer Capital, is a member of LeapFrog’s investment committee.
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