GraceKennedy Limited (GK) has entered into an agreement with the Bank of Nova Scotia (Scotiabank) to acquire 100 per cent of Scotia Insurance Caribbean Limited (SICL), subject to regulatory approvals and other customary closing conditions.
This announcement comes nearly one year after GK acquired Scotia Insurance Eastern Caribbean Limited which has since been renamed GK Life Insurance Eastern Caribbean Limited. GK paid $637.78 million for the insurance company with a contingent consideration of $476.93 million which is dependent on the relative achievement of a gross premium income target over a period ending October 31, 2022.
Like GK Life, SICL offers creditor life insurance on personal loans, residential mortgages, personal lines of credit and personal and small business credit cards. However, GK Life is licensed to conduct ordinary long-term insurance and personal accident insurance while SICL is licensed as a life insurance company. SICL currently operates in Barbados, Belize, British Virgin Islands, Cayman Islands, and Turks & Caicos Islands while GK Life operates in Anguilla, Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, St Lucia, and St. Vincent and the Grenadines. GK Life is domiciled in St Lucia and SICL is licensed in Barbados after gaining its licence on September 25, 2012.
"The acquisition of SICL is another step in the fulfilment of our strategy to grow GK's insurance business in the Caribbean as we continue to expand the footprint of our financial group in the region. Along with last year's acquisition of SIECL, the addition of SICL, and the five territories where it operates, will mean that we have expanded GK's life insurance business to a total of 12 markets in less than two years. M&A [mergers and acquisitions] continues to be a key strategic driver of growth for our group, as we move towards achievement of our 2030 vision.
"Our M&A Unit is in discussions regarding M&A transactions locally and internationally, and we are looking forward to what the future has in store," said GK Group Chief Executive Officer Donald Wehby in the press release on the development.
There are no publicly available financial statements for SICL at the moment. However, for the remaining five months of 2021, GK Life contributed $244.06 million in revenue and $93.46 million in net profit to GK's consolidated net profit which was $8.94 billion. GK also recognised a gain of $593.54 million on acquisition of GK Life due to the value of the intangible assets which were acquired, being the insurance licences and bancassurance agreement exceeding the premium paid above book value. The fair value on acquisition of GK Life was $1.71 billion.
This is GK's latest acquisition this year as its Mergers and Acquisitions Unit continues to hunt for various business to integrate into the 100-year-old food and finance conglomerate. GK paid $401.09 million for an additional 10 per cent stake in CSGK Finance Holdings Limited from Massy Holdings Limited on January 12. It also paid $132.86 million for a 60 per cent stake in Bluedot (2022) Limited led by CEO Larren Peart.
GK announced its 2030 vision earlier this year where they want to earn 70 per cent of their revenues outside of Jamaica, have US$2.1 billion in revenues, US$250 million in profit before tax (PBT) and see GK Foods and the GK Financial Group (GKFG) being listed on Caribbean and major overseas stock exchanges, respectively. GK currently earned 45 per cent of its revenue outside of Jamaica, had US$800 million in revenues and US$75.29 million in PBT at the end of 2021.
GK's first six months saw its revenue increase 15 per cent to $70.34 billion with its PBT up marginally to $5.46 billion. Its net profit attributable to shareholders increased by three per cent to $3.70 billion with basic earnings per share at $3.73. GK shareholders are set to receive a $0.48 dividend this Friday which amounts to $476 million.
GK's insurance segment was up 16 per cent in revenue to $6.49 billion with PBT coming in 13 per cent higher at $584.84 million. According to GK's shareholder report, Key Insurance Company Limited and Canopy Insurance Limited both saw growth in revenues during the first half of 2022, but only Key's profitability increased as Canopy's profitability remains challenged due to medical inflation. Other insurance businesses under the GKFG include GK General Insurance, Allied Insurance Brokers, GraceKennedy Insurance Brokers and GK Insurance Eastern Caribbean.
GK's total assets increased to $200.15 billion with $31.73 billion in cash and deposits, $38.03 billion in investment securities and $34.85 billion in loans receivables. Total liabilities and equity attributable to shareholders stood at $127.25 billion and $69.19 billion, respectively. GK's stock price is down five per cent year to date on the Jamaica Stock Exchange to $94.22 which gives it a market capitalisation of $93.76 billion. There was a trade of 10,722,632 units on Monday at $94.50 which was valued at $1.01 billion. It fell just outside of the top 10 where FredKenn Limited's stake is 14,977,381 shares, but is just slightly below Wehby's direct stake of 10,833,870 shares or 1.09 per cent of the company.
"Since 2019 we have steadily been strengthening GK's presence in the insurance market. The segment continues to benefit from our recent acquisitions, including Key Insurance in 2020 and SIECL in 2021. In 2019 we also entered a joint venture partnership with Musson Jamaica to launch Canopy Insurance. We are looking forward to further building out GK's life insurance business with the addition of SICL, and to serving our customers in these new markets. We are well-positioned to establish GK as a major pan-Caribbean insurer," said deputy CEO of the GK Financial Group with direct responsibility for the insurance segment Steven Whittingham.
This is Scotiabank's latest disposal of a Caribbean operation with the Canadian bank selling its Belize and Antigua and Barbuda operations in March and September 2021, respectively. Scotiabank had attempted to sell its Jamaican and Trinidad and Tobago (T&T) insurance operations to Sagicor Financial Corporation Limited under a 20-year distribution agreement in November 2018, but the deals fell through over the last two years. Scotiabank's revenue and net profit attributable to stockholders was marginally up to CA$7.80 billion and CA$2.52 billion, respectively, for the third quarter. However, its earnings fell below analysts' estimates. Scotiabank's stock price is down 19 per cent year to date on the Toronto Stock Exchange at CA$73.55 and down 21 per cent on the New York Stock Exchange to US$56.16. Shareholders will receive a CA$1.03 dividend on October 27 for shareholders on record as of October 4. Scotiabank's Jamaican and T&T subsidiaries will report earnings within the next two weeks.
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