Insurance group Britam has sold 21.6 million shares of Equity Group
with a current market value of about Sh765 million, further reducing its ownership in Kenya’s second-largest bank.
This
is the latest in a series of divestments from the lender as Britam
seeks to comply with regulatory guidelines capping investment in a bank
at 10 percent of an insurer’s total assets.
The Nairobi
Securities Exchange-listed firm held 275.7 million shares of the bank
equivalent to a 7.3 percent stake as of December 2019, according to its
latest annual report.
This stake was valued at Sh14.7
billion in the review period and accounted for 11.7 percent of Britam’s
total assets of Sh125.2 billion. The holdings dropped from 297.3 million
shares representing a 7.8 percent ownership in the lender in December
2018 that was valued at Sh10.3 billion. This accounted for 9.9 percent
of its total assets of Sh103.6 billion at the time when it complied with
the investment limits.
Britam has in recent years
moved to reduce its exposure to Equity, which in 2014 represented 26
percent of its total assets on the back of the lender’s long-term stock
price rally.
The Insurance Regulatory Authority (IRA) in 2015 published
investment guidelines that, for instance, capped an insurer’s investment
in a bank at 10 percent of its total assets.
Britam started buying Equity shares in 2004 and holds them directly and through its various insurance subsidiaries.
Gains
in its investment portfolio including the Equity stake helped the
insurer report a net profit of Sh3.5 billion in the year ended December
2019, reversing a net loss of Sh2.2 billion the year before.
Its
net unrealised fair value gains on financial assets rose to Sh4.3
billion, transforming from paper losses of Sh3 billion. The gains were
driven by a rally in banking stocks in the fourth quarter after the
repeal of interest rate controls.
“The main contributor
to the difference between the reported profit before tax and the total
comprehensive income in 2019 is the gains resulting from the revaluation
of the strategic investment in Equity Group Holdings Plc, which is
marked to market,” Britam said.
Britam and other
insurers are likely to record major paper losses this year from the
stock market rout that started in March due to the Covid-19 pandemic.
Britam’s other significant investment at the Nairobi bourse is mortgage financier HF Group
,
in which it holds a 48.2 per cent stake. Britam has in the past written
off billions of shillings of its investment in the company. In the
recent past, HF has taken steps towards profitability.
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