Companies

Sanlam raises its stake in Gateway to Sh1bn

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Sanlam Kenya Group CEO Mugo Kibati. FILE PHOTO | SALATON NJAU | NMG

Sanlam Kenya #ticker:PAFR has acquired an additional 12 per cent stake in Gateway Insurance, raising its investment in the loss-making subsidiary to a cumulative Sh914.3 million.

The Nairobi Securities Exchange (NSE)-listed company first bought into the general insurer in March 2015, acquiring a 51 per cent stake for Sh561 million.

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It subsequently raised its interest in the company –which it has renamed to Sanlam General— to 56 per cent later that year at a cost of Sh139.6 million.

The latest investment has raised its interest in the subsidiary to a new high of 68 per cent.

“In 2016 Sanlam Kenya made additional investments of Sh213.6 million in Sanlam General,” the insurer said in its latest annual report.

The company had announced that it would buy additional shares in the subsidiary to help its founders comply with insurance regulations that cap ownership by individuals at 25 per cent.

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The insurance group did not say to what level it was prepared to raise its stake in Sanlam General, but noted that the extra shares would be bought from the family of the company’s founder, the late Godfrey Karuri.

The move by Sanlam to raise its stake in the subsidiary signals its confidence about company’s future prospects though its earnings have deteriorated following its acquisition.

The buyout marked a change in strategy at Sanlam, which in 2011 exited the general insurance business to focus on life policies by selling its 39.9 stake in APA Insurance for Sh855 million.

The company later said it needed to re-enter the general insurance business if it was to get a share of economic growth driven by sectors such as construction.]

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This prompted the Sanlam General’s acquisition whose completion coincided with increased competition in the parent company’s mainstay life insurance business where it previously was among the largest players.