Companies

Acquisition of Real Insurance lifts Britam earnings 23pc

Financial services provider Britam has seen its net profit for the full year to December grow 23 per cent, boosted by the acquisition of Real Insurance in mid-2014.

Real Insurance contributed Sh2.2 billion in premiums and fund management fees, helping grow the group’s gross revenue 55 per cent to Sh14.7 billion from Sh9.46 billion recorded the previous year.

Real Insurance’s five-month contribution to the business helped Britam post an improved full-year net profit of Sh2.84 billion compared to the previous year’s Sh2.32 billion.

“We have been very successful in executing our strategy in 2014 and acquiring Real Insurance was one of the successes,” said Benson Wairegi, Britam’s managing director during the release of the results on Friday.

“The completion of the Real Insurance acquisition will cement our footprint in the region in terms of general insurance and increasing our footprint to seven African countries.” Britam had an un-easy year after it accused former managers of its asset management wing of fraudulently transferring Sh2.9 billion from its coffers.

The company paid Sh825 million in cash to the owners of the 36-year-old company in addition to issuing them with new shares worth Sh550 million, bringing the total transaction value to Sh1.38 billion.

READ: Real Insurance sellers book Sh700m paper gain on Britam

The merger gave Britam access to new markers like Tanzania, Malawi and Mozambique, in line with its strategy to grow its business in local and regional insurance markets.

Prior to the buyout, Britam had a direct presence in Kenya, South Sudan, Rwanda and Uganda.

Britam’s insurance category kept with previous years’ trend of being the biggest revenue driver, contributing 95 per cent (or Sh14 billion) of the group’s total revenue.

The insurance business in Kenya accounted for 84 per cent of these earnings, helping the segment outdo Britam’s asset management and property development businesses.

“Regional subsidiaries contribution to revenue grew by 436 per cent to Sh1.6 billion from Sh294 million (the previous year) attributable to organic growth and business acquisition,” Britam said in a statement to investors.

Other than boost earnings, the acquisition helped Britam leapfrog ICEA Lion to the position of Kenya’s second-largest insurer and narrow the market share gap between it and the industry leader Jubilee.

Britam’s assets grew from Sh46.9 billion to Sh72.9 billion last year with equities and fixed income accounting for 58 per cent of this portfolio.

The share of investments in associates increased to seven per cent (to Sh5.4 billion from 2013’s Sh1.9 billion) while property assets nearly doubled to Sh6.4 billion.

Britam last year raised Sh6 billion through a corporate bond, funds it says it plans to use to grow to grow its business locally and in neighbouring countries.

“The issue was a great success achieving a subscription rate of 247 per cent, a sign of the confidence investors have in Britam,” the company stated.

Britam’s board recommended a dividend payout of 30 cents per share which will see the company pay out Sh581.5 million to its shareholders compared to Sh473 million paid in 2013 when the rate was 25 cents per share.