"Britam offloads Sh852 million stake in Equity Bank"

" \n Insurance group Britam\u00a0has sold an additional 20.1 million shares of Equity Group with a market value of Sh852 million, cutting its ownership in the country\u2019s most profitable lender to a new low of 6.77 per cent in the year ended December. \n \n\n \n Britam, which in 2019 held 275.7 million shares of the lender equivalent to a 7.3 per cent stake, has been reducing the concentration of its investment in the institution which often represents more than 10 per cent of its total assets. \n \n\n \n The insurer says it made a loss of Sh134.5 million in the latest trade which came amid the lender\u2019s depressed share price in the bear run that intensified in the wake of the Covid-19 pandemic. \n \n\n \n The insurer has disclosed the latest disposal in its annual report. \n \n\n \n \u201cFair value loss relating to the disposal of the Equity Group Holdings shares totalled to Sh134.5 million [compared to a gain of Sh332.5 million in 2019],\u201d Britam said. \n \n\n \n Britam has been selling the bank\u2019s shares to diversify its portfolio and also to comply with regulatory guidelines, capping investment in a bank at 10 per cent of an insurer\u2019s total assets. \n \n\n \n \u201cThe concentration on equities in general and on specific counters is closely monitored. As at December 31, 2020, the group held shares in Equity Group Holdings Plc amounting to Sh8.6 billion (2019: Sh14.7 billion) or 12 per cent (2019: 10 per cent) of the total assets,\u201d the insurer said. \n \n\n \n Britam has in recent years moved to reduce its exposure to Equity which in 2014 represented 26 per cent of its total assets on the back of the lender\u2019s long-term stock price rally. \n \n\n \n The Insurance Regulatory Authority (IRA) in 2015 published investment guidelines that, for instance, capped an insurer\u2019s investment in a bank at 10 per cent of its total assets. \n \n\n \n The requirement is meant to promote financial stability of an insurer which can be threatened if an oversize investment goes wrong. \n \n\n \n Britam started buying Equity shares in 2004 and holds them directly and through its various insurance subsidiaries. \n \n\n \n A rally in the lender\u2019s share price means Britam will have to keep cutting its stake to tame the concentration risk. \n \n\n \n Losses in its investment portfolio, including the Equity stake, contributed to the insurer\u2019s record net loss of Sh9.1 billion in the year ended December. \n \n\n \n The insurer also suffered investment losses of Sh5.2 billion in its asset management unit Wealth Fund Management Fund LLP. \n \n\n \n The insurer had made a net profit of Sh3.5 billion a year earlier. The loss in the review period saw the company suspend dividend payouts, having made a distribution of Sh630.8 million or Sh0.25 per share the year before. \n \n\n \n The company did not give details of what went wrong at the asset management unit, only saying there was an \u201casset-liability mismatch\u201d in the fund. \n \n\n \n \u201cThe holding company is committed to support the fund to fulfil its obligations as they fall due through management oversight of the fund\u2019s operations and the agreed recovery plan,\u201d Britam said. \n \n\n \n Financial institutions \n \n\n \n It was not immediately clear how much money the fund was managing. The insurer says the wealth management funds mainly invest in deposits with financial institutions. \n \n\n \n Disclosure of the losses at the fund came after the insurer overhauled its executive and board, including the investment committee, giving it an opportunity to look at issues that may have been glossed over in the past. \n \n\n \n The company appointed Zimbabwean Tavaziva Madzinga as its chief executive effective February 1, replacing Benson Wairegi who had been with the insurer for 40 years. \n \n\n \n The company also replaced Andrew Hollas as chairman on the same day with Mohamed Said Karama on a temporary basis. \n \n\n \n Besides the troubles at the fund, Britam also took a hit from a drop in the value of its listed equities and property investments. \n \n\n \n Britam said that its core insurance business was resilient in the review period. \n \n\n \n \u201cHowever operating results were better than 2019. Our gross earned premiums (GEP) and fund management fees were up 4.2 per cent to Sh28.8 billion from Sh27.7 billion,\u201d the insurer said. \n \n\n \n \u201cThis is attributed to the growth of our insurance revenues especially the international general insurance business which recorded an increase in GEP of 50 per cent, contributing 28 per cent of the group\u2019s GEP and a profit before tax of Sh832 million up from Sh38 million in 2019.\u201d \n "

"Britam offloads Sh852 million stake in Equity Bank"

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