GRACEKENNEDY Financial Group Limited has extended its $403.71-million takeover bid for the remaining interest in Key Insurance Company Limited by nearly a month.

A newspaper advertisement last Saturday noted that the closing date for the takeover bid has been moved from April 22 to May 20. The extension of the timeline doesn’t change the terms and conditions of the offer, which remains at $2.70 per ordinary share of Key.

The takeover bid opened on March 24, with the GK Financial Group seeking to acquire the remaining 23.7326 per cent of Key Insurance. GK Financial spent $1.08 billion between 2020 and 2021 to acquire its super majority stake in Key, which currently stands at 73.2674 per cent. GK’s takeover has seen Key move from reporting significant losses to reporting consistent profits.

As part of the takeover bid process, Key’s board of directors was required to publish a director’s circular regarding their recommendation to the remaining Key shareholders on whether they should accept or decline GK Financial’s offer. A special committee of the board was constituted to give the recommendation to shareholders. This committee included recently appointed Key chair Rochelle Cameron, Herma McRae, Linval Freeman, Heather Goldson, Ashley-Ann Foster-Horne, and Sandra Masterton.

The committee has recommended that the remaining Key shareholders accept the offer put forward by GK Financial. One of the considerations advanced by the committee was the risk of the company being delisted if GK Financial ends up owning 80 per cent or more of Key’s ordinary shares. That would put it in breach of JSE listing requirements and give GK Financial the power to influence Key to request the company be delisted. If Key is delisted, the shares would have no readily available secondary market in which to be traded and there would be additional fees incurred to transfer those shares for the buyer and seller.

Also, if GK Financial was to end up owning 90 per cent or more of Key, GK Financial could invoke Section 209 of the Companies Act to “squeeze out” or make a compulsory acquisition of the remaining Key shares. Even though the squeeze out couldn’t happen for at least four months after the takeover bid closes, the committee noted that there is very little chance of successfully opposing the squeeze out as well.

The board also made reference to the fact that Key’s net asset value or book value at the end of December 2024 was $2.56 per share, with the offer price representing a small premium to that value. Professional valuations by DC Tavares & Finson valued Key’s Half-Way-Tree real estate at $325 million; Auto Assessors and Associates Limited valued the company at $11.67 million; and NAI Jamaica Langford and Brown valued Key’s fixed assets at US$325,110 ($51.04 million).

GK Financial Group was recently licensed as a financial holding company under the Banking Services Act and represents the entity GraceKennedy will use to hold its current and future financially regulated businesses.

The group’s 2024 audited financials, published recently, revealed that it had grown consolidated income/revenue by 10 per cent to $36.39 billion. However, profit before tax increased by only two per cent — from $6.12 billion to $6.23 billion — due to a sharp rise in direct and operating expenses. GK Financial’s consolidated net profit was down four per cent to $4.50 billion but its net profit attributable to shareholders was $3.72 billion.

GK Financial Group’s consolidated total assets grew 10 per cent from $136.17 billion to $149.12 billion as its cash balance moved to $33.54 billion while loans and advances moved to $45.04 billion.

GK Financial’s move to acquire Key comes at a time when the general insurance industry is set to become more consolidated in short order, when British Caribbean Insurance Company Limited (BCIC) acquires JN General Insurance Company Limited (JNGI) in the coming weeks.

Data recently published by the Financial Services Commission (FSC) revealed that the general insurance sector collected $87.30 billion in insurance revenue for 2024. BCIC reported $20.24 billion in insurance revenue for 2024, which would position it as the largest general insurer by insurance revenue with 23 per cent of the entire pie.

When one takes a retrospective view of 2023, BCIC’s insurance revenue of $16.02 billion and JNGI’s insurance revenue of $8.36 billion would translate to a combined $24.38 billion or a third of the $73.4 billion in insurance revenue collected by the general insurance sector in 2023.

GK General Insurance Company, GraceKennedy’s other general insurance arm, reported $11.15 billion in insurance revenue in 2024. When combined with Key’s $3.06 billion in insurance revenue GK’s combined insurance revenue from these two businesses would come to $14.21 billion or 16 per cent of the general insurance sector.

The FSC’s data for the general insurance sector revealed that while insurance revenue increased 19 per cent, the insurance service result only grew nine per cent — from $3.2 billion to $3.5 billion — due to higher insurance service expenses around claims and reinsurance costs. Profit before taxes stood at $3.7 billion while net profit was $2.6 billion. GK General’s audited financials revealed that the transition from IFRS 4 to IFRS 17 for insurance financial reporting resulted in some insurance companies understating their 2023 tax liability. As a result, an industry wide arrangement was reached with Tax Administration Jamaica for the insurance companies to pay these additional taxes over the next four years, starting from 2024.

Total assets for the sector stood at $101.7 billion, with $67.8 billion of these assets being investments. Total liabilities were $64.5 billion, with insurance liabilities at $55.8 billion while capital for the sector improved three per cent to $37.2 billion.