SA firm’s stake in Pan Africa doubles to Sh4.1 billion

What you need to know:

Insurer’s stock has touched Sh77.50 one-year high on market expectations.
The share price valued Sanlam’s holding of 55.81 per cent in Pan Africa at Sh4.1 billion.
Regulatory filings to the CMA shows Sanlam bought 108,600 shares in the eight months to August, raising its total shareholding to 53.6 million shares.

South African company Sanlam’s investment in Pan Africa Insurance has soared by Sh2 billion driven by a rally of the firm’s share price at the Nairobi Securities Exchange.

The Pan Africa stock jumped eight per cent in Wednesday’s trading to touch a one-year high of Sh77.50, driven by market expectations of improved industry performance.

The share price valued Sanlam’s holding of 55.81 per cent in Pan Africa at Sh4.1 billion, compared to Sh2.1 billion at the close of last year when each share traded at Sh40.25.

Regulatory filings to the Capital Markets Authority shows Sanlam bought 108,600 shares in the eight months to August, raising its total shareholding to 53.6 million shares.

This is in line with the company’s disclosure of intention to increase its stake in the insurer to 60 per cent from the 50 per cent held then. As at end of August its stake was 55.81 per cent, from 55.69 per cent in December.

READ: Pan Africa Insurance closes Sanlam Kenya acquisition

However, other large shareholders in the insurance company cut back their stake during the same period, the regulatory filings show.

Pan Africa’s third-largest owner APA Insurance cut its stake to 1.03 per cent by selling 367,700 shares in the eight months to August. Thammo holdings also cut its shareholding to below one per cent by trading 359,644 shares.

Kancher Kenya, which held a 5.43 per cent stake in the company early last year, is not listed among the top 20 shareholders.

“Insurance companies topped the gainers list, with Pan Africa leading the pack up eight per cent to a new 12-month high of Sh81.

“Insurance companies are poised to post strong 2013 earnings driven by increased investment returns due to the upswing in the equities market as well as strong growth in premiums,” said Standard Investment Bank.

Sanlam’s accumulation of the Kenyan insurer’s stocks is driven by its desire to have control in re-organising the company.

Sanlam recently announced it will partner with the Standard Chartered Bank in offering bancassurance services across Africa. The partnership is expected to be driven by Pan Africa in the Kenyan market.

The insurance company has also partnered with Airtel to offer low-cost life insurance cover to subscribers as it seeks to boost its market penetration.
In the year to June Pan Africa’s net profit jumped 266.6 per cent to Sh800.2 million.

The insurer has lined up more plots for sale from its vast Runda estate to drive revenue growth in the second half of the year.

The insurance firm originally owned 1,000 acres of land in the area, some of which it has developed into residential houses for sale. The asking price for plots in the Runda area is between Sh25 million and 30 million for a half-acre and Sh10-15 million for quarter acre pieces.

Standard Investment Bank said it had raised its forecasted earnings for the insurance industry by an average of 53 per cent following the strong performance by the sector in the first six months of the year.

Shares of other listed insurers have also rallied, with Britam and Liberty Holdings also trading at twelve month highs. All asset classes that insurance companies have invested in have registered steady returns during the year, fanning the investors’ expectations.

Equities market, in which insurance sector has invested 13 per cent of its funds in both life and general business, has recorded a 22.6 per cent rise during the year as indicated by the 20 Share Index.

Interest rates have been on the decline and this has seen the value of Treasury bonds held by the institutions rise.