Way cleared for Key Insurance rights issue


Way cleared for Key Insurance rights issue

By Durrant Pate
Observer business writer

Wednesday, October 28, 2020

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Key Insurance Company shareholders have given the green light to the financially strapped company's planned rights issue to raise much-needed capital.

In the last 18 months, Key Insurance finances have gone into the red with some reprieve in the last quarter, where strategic and operational changes implemented by the new management resulted in a significant reduction in net losses. The losses for the second quarter were cut from $144.5 million in 2019 to $25.4 million in June 2020.

At its annual general meeting (AGM) last week, shareholders approved two resolutions: the proposed rights issue and increasing the company's share capital. The rights issue will provide a much-needed lifeline for the company, which was taken over by GraceKennedy Limited (GK) in March this year.

The rights issue will be renounceable, meaning that Key's shareholders can choose to sell their rights to other existing shareholders.

Given GK's majority shares in Key Insurance, it is anticipated that the Jamaican conglomerate will be making a sizeable capital injection into the company via the rights issue. In March this year, GK, through its wholly owned subsidiary GraceKennedy Financial Group, acquired 65 per cent of the share capital of Key.

As such, it is expected that GK will utilise its share equity to command the greatest take-up of the additional shares being made available in the rights issue, the date of which will be announced in the coming days. The maximum take-up by GK will ensure that its shareholding in the insurance company is not diluted.

Since GK's acquisition of the company, Key has attracted 330 new shareholders, taking the total to 501 as of October 21, 2020. Additionally, Key insurance has also 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 $9.60 on October 21, 2020.

Speaking at the AGM, Chairman Don Wehby pointed out that the rights issue is just part of the wider plan to get the company back on solid footing, while highlighting several critical actions which have been successfully undertaken by the board and management. These include stopping Key's accumulated losses and loss of market share through the implementation of a 90-day turnaround plan as well as the development of a two-year strategic plan, which will provide an attractive return on investment to shareholders.

Reflecting on GK's decision to acquire Key Insurance, Wehby outlined several considerations, including its potential to increase market share, the significant synergies which exist between Key's business and GK's Financial Services Division, the possibilities of developing specialised Key motor and home insurance offerings, and the strength of the Key brand in Jamaica. He explained that the acquisition also fit into GK Financial Services' expansion strategy in Jamaica and the English-speaking Caribbean.

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