Britam Holdings group managing director Tavaziva Madzinga. PHOTO | DIANA NGILA | NMG Insurance group Britam has sold an additional 20.1 million shares of Equity Group with a market value of Sh852 million, cutting its ownership in the country’s most profitable lender to a new low of 6.77 per cent in the year ended December.
Britam, which in 2019 held 275.7 million shares of the lender equivalent to a 7.3 per cent stake, has been reducing the concentration of its investment in the institution which often represents more than 10 per cent of its total assets.
The insurer says it made a loss of Sh134.5 million in the latest trade which came amid the lender’s depressed share price in the bear run that intensified in the wake of the Covid-19 pandemic.
The insurer has disclosed the latest disposal in its annual report.
“Fair value loss relating to the disposal of the Equity Group Holdings shares totalled to Sh134.5 million [compared to a gain of Sh332.5 million in 2019],” Britam said.
“Fair value loss on revaluation of the Equity Group shares totalled to Sh4.2 billion [compared to a gain of Sh5.1 billion] in 2019].”
Britam has been selling the bank’s shares to diversify its portfolio and also to comply with regulatory guidelines, capping investment in a bank at 10 per cent of an insurer’s total assets.
“The concentration on equities in general and on specific counters is closely monitored. As at December 31, 2020, the group held shares in Equity Group Holdings Plc amounting to Sh8.6 billion (2019: Sh14.7 billion) or 12 per cent (2019: 10 per cent) of the total assets,” the insurer said.
Britam has in recent years moved to reduce its exposure to Equity which in 2014 represented 26 per cent of its total assets on the back of the lender’s long-term stock price rally.
The Insurance Regulatory Authority (IRA) in 2015 published investment guidelines that, for instance, capped an insurer’s investment in a bank at 10 per cent of its total assets.
The requirement is meant to promote financial stability of an insurer which can be threatened if an oversize investment goes wrong.Britam started buying Equity shares in 2004 and holds them directly and through its various insurance subsidiaries.A rally in the lender’s share price means Britam will have to keep cutting its stake to tame the concentration risk.Losses in its investment portfolio, including the Equity stake, contributed to the insurer’s record net loss of Sh9.1 […]