British American Investment Company (Kenya) Ltd (www.british-american.co.ke) launched its initial public offer (IPO) on 12 July, aiming to list on the Nairobi Stock Exchange. It aims to raise KES 5.58 billion (US$62.2 million) for expansion in the offer which is open until 5 August.
British American is issuing 650 m new ordinary shares at KES9 each. East African retail investors and foreign investors have each been allocated 30% of the shares, institutional investors 37% and employees, agents and individual life policy holders get the remaining 3%.
The offer was launched by Prime Minister Raila Odinga. He urged more people to use insurance products, and said market penetration is only 2.3% of GDP, according to Kenyan Broadcasting Corporation. The Standard newspaper reports him saying “I would like to take this opportunity to assure investors that Kenya is on a renewal path.”
Expansion: “missing middle” and new products
According to a report in Kenya’s Business Daily newspaper, of the money raised KES1 bn will be used for new investments and entry into the regional market while KES 1.3 bn would be used to grow its Kenyan insurance businesses and to expand its asset management business, including launching new funds for Kenyans in the diaspora as well as local and international investors.
The company will use KES2.5 bn to set up real estate investment trusts when the proposed law comes into effect and to develop property investments, including commercial buildings and housing units. KES750 m is to offset a loan from Commercial Bank of Africa (CBA) and KES 300 m is for offer expenses.
The paper reports British American’s chairman Nicholas Ashford-Hodges saying funds raised would be used to boost the company’s operations in Kenya and expand to regional markets: “This IPO will give British American an opportunity to increase the scope of its operations and widen its footprint.”
The company hopes to seize emerging opportunities through innovative products such as micro-insurance and bank-assurance. According to the Standard, managing director Benson Wairegi said the company is developing more products for the retail market and small and medium-sized businesses: “We seek to fundamentally redefine the scale and scope of the insurance sector in Kenya and the wider region. Our established model of scale, reach and multi-layered selling will also be extended to the retail market and SMEs in the wider geographical region.”
Regional expansion – Uganda, Tanzania, South Sudan, Rwanda
On 7 July, BAT launched an insurance services business in Uganda through a subsidiary, Britam Insurance Company (Uganda) Limited, which has a capital of UGX5.6 bn ($2.2m). It also aims to open offices in Tanzania, Rwanda, and Southern Sudan.
British American is also the holding company of British American Insurance Company (Kenya) Ltd and British American Asset Managers Ltd (BAAM).
The market capitalization of the new company will be KES19.4bn ($216.3m), the highest among listed insurance firms. CfC Insurance Holdings, which was listed by introduction in April, was valued at KES6.85bn as at the close of trading yesterday, Jubilee Holdings Ltd at KES8.86bn, and Pan African Insurance at KES1.92bn, according to the paper.
Business Daily reports that British American Group posted KES2.7 bn in profits after tax last year, up from KES421 mn loss in 2009. The company made KES4.68 bn (KES 196m in 2009) in investment income and KES220 m (KES 32 m) in other income.