Key Insurance considers rights issue
Published:Friday | November 15, 2019 | 12:17 AM
Key Insurance Company is considering a rights issue to strengthen its capital base, which Managing Director Sandra Masterton said is in furtherance of the general insurer’s turnaround plan.
Masterton and two other directors of the insurance company hold about 65 per cent of the 368 million ordinary shares in Key: Masterton holds 92 million units; Chairman Natalia Gobin-Gunter, 75.2 million units; and Kala Abrahams, 73.1 million units.
A special board meeting scheduled for today, Friday, will discuss whether or not the major shareholders would want to dilute ownership or participate in a potential rights issue.
“There is the possibility that we may participate,” she said. “After the meeting we would have a statement.”
Key Insurance’s latest financials indicate that it would require $1.7 billion in additional equity to equal its total liabilities. Up to June 2019, its total liabilities stood at $2.45 billion, or 3.5 times the level of equity at $698 million.
Key’s management devised a turnaround plan for the company arising from the losses on its motor policies that led to the company underperforming on a key solvency test. The plan charts a path towards stable profits by 2021. It also calls for Key to achieve and maintain at least the minimum capital test of 250 per cent, as prescribed by its regulator, the Financial Services Commission.
Key achieved a ration of 112.5 per cent, less than half the regulatory benchmark, in financial year 2018. Since then, it has recovered ground and has been surpassing the benchmark on a monthly basis under the turnaround plan. The execution of the plan involved culling riskier motor policies and converting some assets into near-cash.
For the first half of 2019, the company recorded a net loss of $182 million, a deterioration of its performance in the comparative six months ending June 2018, when its losses topped $72.1 million. The third-quarter results are pending.