14 June 2010

Kenya: Jubilee Investors Eye Lift From Bonus Share Issue

Listed insurer Jubilee Holdings Limited has announced plans for a bonus share payout of one for every 10 held following what they term impressive profits last year.

The firm recorded a 24 per cent increase in profit for the year ended December 31, 2009, from Sh900 million recorded in 2008 to Sh1.1 billion, which saw the directors declare a dividend payout of 90 per cent of the par value of Sh4.50 per share.

Upward tend

The recommended bonus share issue, to be approved at a shareholders meeting on Monday, will see the number of issued shares in the firm increase to 247.5 million from the current 225 million.

"Being a fairly illiquid counter, the bonus issue will work positively for the counter as investor demand will push its share price up on the NSE," said Mr Francis Mwangi, an analyst at Africa Alliance Investment Bank.

Jubilee shares have been on an upwards trend at the bourse, buoyed by renewed interest in the market, growing 62 per cent in the last six months to settle at Sh187 per share.

Jubilee currently has one of the lowest price earning ratio (PE) among listed financial stocks at the NSE at 10, which is half that of its listed competitor Pan African Insurance with a PE ratio of 21, making the counter attractive to many investors.

"The counter is fairly priced, but its increase in price will depend on how holders interpret the bonus," said a market dealer at Standard Investment Bank, citing the high dividend paid out by the insurer which had largely contributed to its lack of liquidity.

Activity at the counter has been slack, with only 1,200 shares trading on Friday last week.

"We have crossed the Sh1.1 billion mark in our group profits and have recorded an underwriting profit of Sh359 million," said Jubilee Holdings chairman Nizar Juma in a statement, adding that the firm had improved its market share in the regional market.

Jubilee is the largest composite insurer in the East Africa region, with a client base of over 250,000 policy holders.

The group is now the largest capitalised insurer in Kenya, with a paid up capital of Sh700 million.

It saw a 21 per cent increase in market share in their Tanzanian business and a 36 per cent growth in Uganda.

The firm's gross written premium increased by 21 per cent to Sh9.1 billion in 2009, with underwriting profit going up 36 per cent to Sh359 million from Sh256 million in 2008.

Jubilee, an affiliate of the Aga Khan Fund for Economic Development, is also the largest shareholder in Diamond Trust Bank and TPS Serena, both of which are listed at the NSE.

Results from most insurance firms indicate increased in growth in 2009 despite a harsh economic environment in the country during the year.

This is expected to improve further as the country recovers from the effects of a severe drought, post-election violence and the global financial crisis.

In addition, insurance firms invested heavily in recent government securities issues, with Jubilees investment in such securities increasing by 48 per cent to Sh3.57 billion from Sh2.4 billion at the end of 2008.

During the bull run at the NSE earlier in the year, many insurance firms had invested heavily in equities, leading to reduced investment income as the bourse plummeted in 2008, forcing them to record losses.

According to an Association of Kenya Insurers (AKI) report released last year, insurers in Kenya were found to rely heavily on investment income as a cushion for their underwriting results, which had reported high loss ratios of between 56 per cent and 60 per cent from 2004 to 2007.

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