Resolution set to raise Sh500m in private placement
Resolution Insurance CEO Peter Nduati at a past event. Mr Nduati said he would cut his shareholding in the insurer to 18.7 per cent after the private placement. Photo/FILE
What you need to know:
The company plans to acquire an insurance firm in Uganda and start ‘greenfield’ operations in Rwanda and South Sudan this year.
The new cash will also help Resolution expand its new employee benefit products like group life covers in Kenya and Tanzania where it already operates.
The new fundraising comes after the company made a rights issue last year increasing its paid up share capital to Sh300 million — the minimum level for firms seeking an insurance licence.
Resolution Insurance is set to raise Sh500 million in a private placement that will see shareholding of its main owners fall.
The recapitalisation to leverage its regional expansion plan is expected to conclude this year and result in dilution of the current shareholders of the underwriter that has converted from a medical insurance provider to a general insurer.
Entry of new investors in the company will loosen the grip of its chief executive Peter Nduati, former Equity Bank executive John Mwangi, who together with Heartwood jointly owned 22.2 per cent in January last year, and private equity firm African Development Corporation (ADC).
Mr Nduati said that he owns a 20 per cent stake in the firm, bringing him into compliance with insurance rules that caps individual shareholding in insurers at 25 per cent.
The law also imposes a similar shareholding cap for executives and directors in insurance companies they work for— meaning that the CEO who previously owned 52 per cent stake in Resolution had to sell part of his shares.
Mr Nduati said he had cut his stake from 52 per cent in 2010 to the current level by selling to the ADC in deals estimated at Sh380 million, based on Resolution’s valuation in September last year.
“I plan to have an 18.7 per cent shareholding (in Resolution) after the private placement,” he said without disclosing the extent of dilution of other shareholders.
Resolution also made changes in its boardroom ahead of its conversion to a general insurer in a move that saw the exit of directors Frost Josiah, Florence Gitao, Johan Pretorius, and Catharina Sevillano Barredo.
It appointed new directors Andrew Musangi, Joseph Wainaina, Patrice Baside, and Jacqueline Kitulu, expanding its board members to eight from seven.
The company plans to acquire an insurance firm in Uganda and start ‘greenfield’ operations in Rwanda and South Sudan this year.
The new cash will also help Resolution expand its new employee benefit products like group life covers in Kenya and Tanzania where it already operates.
“We have started the process of raising the funds and we have approached several investors,” said Mr Nduati. “We have identified acquisition targets in Uganda where we have been operating through partnerships.”
The company has ambitions to expand farther into West African markets such as Nigeria and Ghana in the medium term as it seeks to cut its reliance on the local market.
Its gross premiums rose 31 per cent to Sh2 billion last year compared to Sh1.5 billion the year before.
Mr Nduati said the company would continue to focus on medical insurance as it diversifies into the general insurance market.
Resolution mainly targets middle class individuals and small and medium-sized firms with medical insurance plans, citing the relatively higher profit margins from such clients compared to large firms.
It has introduced work injury benefits, personal accident, and group life covers in Kenya and the Tanzania market where it also licensed to operate as a general insurer.
Resolution’s conversion into a fully fledged insurance company came after the December deadline set by the Insurance Regulatory Authority requiring all medical insurance providers to convert into insurers, insurance brokers, or medical service providers under the Ministry of Health.
The new fundraising comes after the company made a rights issue last year increasing its paid up share capital to Sh300 million — the minimum level for firms seeking an insurance licence.
