Insurance brokerage firm Caribbean Assurance Brokers Limited (CAB) is seeking to raise just over $100 million in an initial public offering (IPO) on the Junior Market of the Jamaica Stock Exchange (JSE).

According to the prospectus posted on Friday last, the IPO, which opens on February 18 and closes on March 3, will offer 52.5 million ordinary shares at a subscription price of $1.91.

Mayberry Investments Limited will be the lead brokers for the IPO and financial advisors for CAB.

Of the total shares that are being offered, 8,137,500 will be ordinary shares made available to the general public at the listed unit price, which will be allocated on a first come, first served basis.

The rest are reserved shares, available at the listed price and broken down as follows: 6,300,000 shares for a select number of directors of the company, 5,775,000 million for a select number of staff members of the company, 27,037,500 shares for a select number of long-standing clients of the company, and 5,250,000 for clients of the lead broker, Mayberry Investments.

If any of the reserved shares are not fully subscribed then the excess will first be available for subscription by the other reserved share categories, and then will be made available for subscription by the general public.

The allotment of shares by CAB will be conditional upon the shares being listed for trading on the Junior Market of the JSE. If the shares are not admitted for trading then all provisional allotment of shares in the IPO will be cancelled, and payment made by subscribers will be returned in full without interest.

USE OF IPO PROCEEDS

The company intends to use the net proceeds of the IPO to pay IPO and listing expenses, after which it expects to receive approximately $90,775,000 after the deductions.

Also, CAB plans to expand its brokerage operations to other Caribbean territories, provide working capital for the company, and expand the company’s solar photovoltaic system.

The directors stated that the IPO, followed by the listing of the shares on the Junior Market of the JSE, will enhance its public profile, create a liquid market for the shares, provide access to the capital market to enable CAB to fund growth through equity capital rather than debt, increase staff retention by providing them with an opportunity to get a stake in the company, and will allow the company to benefit from tax incentives granted to listed companies.

FINANCIAL PERFORMANCE

In the nine-month period of January 1 – September 30 2019 CAB earned gross revenues of $336.1 million, while net profit for the period under review was $56.7 million, a $26.5 million or 31.9 per cent reduction year-on-year when compared with the $83.2 million recorded in the prior corresponding period.

For the period under review, the company recorded other income of $31.1 million, a decrease when compared with the $41 million recorded in the corresponding period in 2018. However, operating expenses increased to $290.60 million in the nine-month period.

According to CAB, as of December 31, 2019 the company’s financial indebtedness to banks, financial institutions, and other lenders was $91 million.

The company is registered by the Financial Services Commission (FSC) as a local insurance broker and as a facultative insurance broker. In both cases, CAB acts on behalf of local people to place their insurance business with local insurers or FSC-approved overseas insurers. It is organised into four business divisions — General Insurance, Employee Benefits, Individual Life Insurance, and International Insurance.