Nelson Kuria, the CIC Insurance Group chief executive. Photo/FILE
What you need to know:
CIC is, however, yet to get an approval for the issue from the Capital Markets Authority (CMA).
CIC has had opened talks with its major shareholder, Cooperative Insurance Society (CIS) with a 74 per cent stake, to determine its appetite for the planned rights issue.
CIC Insurance is planning to raise Sh3 billion through a corporate bond issue, chief executive Nelson Kuria has said.
The bond, which will be used to finance expansion plans, is scheduled to precede a rights issue earmarked for next year.
Mr Kuria said CIC was, however, yet to get an approval for the issue from the Capital Markets Authority (CMA).
“Uptake of the bond will inform the size of the rights issue,” said the CEO in an interview.
The shareholders cash call is expected to finance CIC’s real estate projects. The insurer plans to create an additional three billion shares in preparation for the rights issue.
Mr Kuria said CIC had opened talks with its major shareholder, Cooperative Insurance Society (CIS) with a 74 per cent stake, to determine its appetite for the planned rights issue.
The firm is seeking to establish the potential extent of dilution, with an eye on retaining its co-operative movement business model and ownership.
CIS holds CIC’s stock on behalf of hundreds of Saccos which founded the insurer and form a significant base of its customers. Mr Kuria said the corporate bond will likely have a tenor of between five and seven years.
Interest rates on comparative Treasury bonds have dropped to about 11 per cent, implying that CIC could pay a premium on these rates to attract buyers of the paper.
The insurer has preferred to use joint ventures with co-operative organisations for its regional expansion.
The company recently signed a joint venture deal with Malawi Union of Savings and Credit Co-operatives (Muscco) to start an insurance firm in Malawi.
CIC and Muscco hold a 49 per cent stake each in the operation with an unnamed third institution taking the remaining two per cent equity.
CIC’s capital contribution stands at Sh300 million, with the Malawian insurer set to open its doors from July. The company is also eyeing joint ventures with local investors to launch operations in Uganda and South Sudan in the near term.
It has allocated Sh500 million for the South Sudan venture in which it will take a 69 per cent stake while Co-operative Bank’s subsidiary in that market will take the remaining 31 per cent.
CIC also plans to invest Sh300 million to acquire a 51 per cent stake in a new subsidiary in Uganda, with the remaining 49 per cent equity to be held by Uganda Cooperative Savings and Credit Union Limited.
The regional expansion is meant to grow CIC’s earnings and help it diversify from the Kenyan market. All the countries CIC is targeting have a low insurance uptake, offering future growth potential.
