Insurance firm Britam Holdings expects to complete the sale of its 6.7 percent stake in Equity Group to the International Finance Corporation (IFC) this month, raising Sh13.9 billion from the transaction.
The deal is expected to see the Nairobi Securities Exchange -listed firm book significant gains, lifting its earnings in the half-year ending June.
It will mark the company’s exit from the bank which has been one of its most successful investments in decades.
“We expect to close the transaction at the end of April,” said Catherine Karita, Britam’s director for strategy and investor relations.
The insurer signed an agreement to sell 253.1 million shares of the bank to IFC at a price of Sh55 each.
Prior to the agreement to sell the remaining shares to the global financier, Britam had been cutting its stake in Equity by selling shares in the open market.
The trades are due to Britam’s need to diversify its portfolio and also to comply with regulatory guidelines that cap investment in a bank at 10 percent of an insurer’s total assets.
Completion of the deal with IFC will boost Britam’s profit in the current financial year.
The insurer reported a net income of Sh72.1 million last year, reversing a net loss of Sh9.1 billion recorded in 2020.
The profit would have been larger were it not for a higher-than-usual tax rate of 92.8 percent that the company paid in the review period.
The higher taxation was due to provisions for investment losses of Sh5.2 billion and which do not qualify for tax deduction.
Britam paid taxes amounting to Sh939.3 million on the pre-tax earnings of Sh1 billion.
This means that the investment losses raised the company’s obligations beyond the normal 30 percent corporate income tax rate under which it would have paid only Sh303.3 million.
“The [2021] year tax expense is significantly higher compared to the profit before tax due to significant one-off expenses in the holdings company that are tax disallowable,” Ms Karita said.
She clarified that the exceptional expenses are the provisions for the investment losses, most of which occurred in the insurer’s asset management unit Wealth Fund Management Fund LLP.
