GK subsidiary could raise as much as $1 billion
Key Insurance Company Ltd’s rights issue is set to take place on December 10, as the entity seeks to raise much needed capital to grow out of its current string of financial losses.
The December 10 date for the rights issue was decided recently by a committee of the board of directors. The rights issue was previously approved by shareholders at the company’s annual general meeting (AGM) last month.
The company is aiming to raise as much as $1 billion from the renounceable rights issue, meaning shareholders can choose to sell their rights to other existing shareholders. The money raised would strengthen Key Insurance’s capital base, which is seen as an imperative at this time considering the deterioration of the company’s minimum capital test ratio over the years.
Key Insurance’s authorised share capital was increased to 700 million shares at its recent AGM with a directive, which allows the directors to issue a minimum of just over 122.8 million shares for a renounceable rights issue. GK Capital Management has been confirmed as one of the firms working on the capital raise.
KEY GETS MUCH-NEEDED LIFELINE SINCE TAKEOVER BY GRACE
The company got a much-needed lifeline when it was taken over in March this year by GraceKennedy Limited (GK). GK through its wholly owned subsidiary, GraceKennedy Financial Group, acquired 65 per cent of the share equity of Key Insurance.
GK has already confirmed that it will be taking up its full allotment of new shares from their 65 per cent shareholding in the GK insurance subsidiary. Since GK’s acquisition, Key Insurance has attracted 330 new shareholders, taking the total to 501 as of October 21, 2020.
In addition, the company has seen a 357 per cent increase in market capitalisation, moving from $774 million to $3.5 billion. This is reflected in the increase in the company’s share price from $2.10 pre-acquisition in March 2020 to $10.02 at the end of trading yesterday.
STOCK ADVANCES WITH NEWS OF RIGHTS ISSUE DATE ANNOUNCEMENT
With news of the December 10 rights issue date, the stock gained $1.47 in trading on November 27, coming from $8.55 at the close of trading the previous day. Following years of sustained losses and a breach of its regulatory requirements, Key Insurance is turning a new leaf as the GK-led subsidiary, growing its premiums by 20 per cent to $402 million during its third quarter.
In less than six months since gaining full control of Key Insurance, GK’s strategic initiatives and turnaround plan have borne fruit with the company, which recording a small net profit of $5.7 million for the third quarter compared to the losses for the same period in 2019. Don Wehby, group chief executive officer of GK and chairman of Key Insurance, attributed the turn-around results to the new management’s implementation of the GK model of digital transformation, consumer centricity, risk management and performance-driven pillars at Key Insurance.
This was supported by a greater focus on managing claim liabilities, a new business development department unit and a strong marketing campaign for some of its new and existing product lines.