Kenya Reinsurance Company (Kenya Re) shareholders are set for a Sh6.69 billion windfall in a bonus share issue that will see them gain one share for each held, in addition to a record Sh839.9 million dividend earnings.
A bonus issue is where a company offers free additional shares to existing shareholders. This is funded by the firm's earnings or share reserves.
Companies issue bonus shares to make their stock more attractive for retail investors, provide an alternative to a cash dividend and reflect a position of financial health.
Kenya Re plans to inject into the business Sh6.99 billion from its cash reserves by issuing to existing owners an additional Sh2.79 billion bonus shares, currently valued at Sh6.69 billion going by the Monday opening price of Sh2.39 at the Nairobi Securities Exchange (NSE).
“The shares so distributed shall rank pari-passu (equally) for all purposes with the existing shares in the capital of the company, and further that, the new ordinary shares shall not qualify for the proposed dividend for the year ended December 31, 2023, and the directors be and are hereby authorised to give effect to this resolution,” reads the AGM notice in part.
The bonus shares, to be awarded to shareholders in Kenya Re books as of June 25, will be in addition to Sh0.30 per share dividends totalling Sh839.9 million for the financial year ended December 2023—a raise from Sh0.20 amounting to Sh560 million that was paid on the previous year’s performance. This is the second year of increased distribution, given that the 2021 payout was Sh0.10 per share.
The Sh839.9 million dividends will be paid on or about August 9, to shareholders registered in Kenya Re’s books as of June 25, coming on the back of net profit for the year ended December 2023 growing 41.6 percent to Sh4.97 billion.
The planned record dividend and bonus share, first made public on Wednesday last week, has set the share rallying as investors angle for the benefit.
Shareholders are expected to endorse the dividend and bonus shares decision during the annual general meeting (AGM) slated for June 25.
Kenya Re share had closed Wednesday last week at Sh2.08 but started rallying on the news of the dividend and bonus issue to hit Sh2.44, being a 17.3 percent gain, as at the end of Friday trading at the NSE.
Kenya Re said in an AGM notice it plans to increase its share capital to Sh16 billion made up of 6.4 billion ordinary shares of Sh2.50 each from the current Sh8 billion that is composed of 3.2 billion ordinary shares of Sh2.50 apiece.
The reinsurer said it plans to capitalize Sh.699 billion, being part of the amount standing to the credit of the company’s revenue reserves and apply the same in making full payment of the new 2.79 billion ordinary shares of Sh2.50 each.
Shareholders will also be expected to pass a special resolution to amend the company’s by-laws to reflect the new shares.
The latest bonus shares follow that of June 2019 where existing shareholders were given three shares for each one share held. Kenya Re that year injected into the business Sh5.25 billion from its cash reserves by issuing additional 2.099 billion bonus shares, then valued at about Sh26.2 billion.
Kenya Re 2019 bonus issue was mainly to enable it to continue underwriting business in the Egypt market where the regulator had revised the capital requirement for the reinsurance company.
