Insurance firm Britam Holdings has completed the sale of its 6.7 percent stake in Equity Group to the International Finance Corporation (IFC), raising Sh13.9 billion from the transaction.
The deal was completed on Tuesday, the parties announced. The insurer is expected to have booked major gains in the deal which could boost its earnings in the half year ending June.
The insurer sold 253.1 million shares of the bank to IFC at a price of Sh55 each.
This marks the company’s exit from the bank which has been one of its most successful investments in decades.
Prior to the deal, Britam had been cutting its stake in Equity by selling shares in the open market.
This was due to the Nairobi Securities Exchange -listed firm’s need to diversify its portfolio and also to comply with regulatory guidelines that cap investment in a bank at 10 percent of an insurer’s total assets.
The insurer reported a net income of Sh72.1 million last year, reversing a net loss of Sh9.1 billion recorded in 2020.
The profit would have been larger were it not for a higher-than-usual tax rate of 92.8 percent that the company paid in the review period.
Britam paid taxes amounting to Sh939.3 million on the pre-tax earnings of Sh1 billion.
The higher taxation was due to provisions for investment losses of Sh5.2 billion and which did not qualify for a tax deduction.
The investment losses raised the company’s obligations beyond the normal 30 percent corporate income tax rate under which it would have paid only Sh303.3 million.
The investment losses were concentrated in the insurer’s asset management unit Wealth Fund Management Fund LLP.
For IFC, the proposed investment marks a tighter relationship with Equity to which it is the single largest creditor.
The global financier had lent the bank Sh21.8 billion as of December 2020, leading a list of development finance institutions that have backed the lender’s aggressive regional expansion.
The insurer sold the bank’s shares in a private transaction in which the parties negotiated the price and other terms.
