CIC Insurance Group has tied the repayment of a Sh3.4 billion loan from Co-op Bank to sale of 200 acres of land in Kiambu County.
The loan was part of the funds that the insurer mobilized to settle its Sh5 billion corporate bond in October 2019.
CIC used the Kiambu land, located next to Tatu City, to secure the loan from Co-op Bank which owns a 24.8 percent stake in the insurer.
The company says it will soon repay the bank loan from amounts raised in the sale of the land, according to the agreement between the parties.
“The bank [loan] is contingent on sale of the land which we are about to close,” the insurer’s chief executive Patrick Nyaga said when announcing the company’s half year results last week.
He noted that CIC is progressively retiring its debt, having settled all inter-company loans earlier this year.
The insurer in 2019 announced it would sell 512 acres in Kajiado County and 200 acres in Kiambu County but the transactions have delayed.
It was not immediately clear whether the company is selling all the land parcels as disclosed earlier or if it is only disposing of the Kiambu parcel.
Mr Nyaga said a few prospective buyers have shown interest in the land, adding that the sale will reduce CIC’s debt, improve its capital position and boost cash flows.
“The land assets have already created a lot of capital value but at the moment they are not earning any money for us,” Mr Nyaga said.
“They also impact on our capital calculations therefore the prudent thing to do is to dispose and reinvest the same in assets that are earning on a monthly and regular basis.”
The Kajiado land is valued at Sh1.7 billion while the Kiambu land is worth Sh3.8 billion, according to an assessment done in December 2020.
CIC is expected to book substantial gains from the land sale. The insurer anticipates the debt reduction to boost the momentum it recorded in the half year ended June when it made a net profit of Sh259.5 million.
The company had posted a Sh335.5 million net loss a year earlier. The return to profitability was helped by improved performance in the underwriting business and higher investment income.
Investment and other income, including positive currency movements at its South Sudan subsidiary, more than doubled to Sh2.6 billion from Sh1.2 billion.
“Investment income saw a marked improvement and this was mainly due to unwinding of prior year’s foreign exchange losses in South Sudan and gains from our equities portfolio,” Mr Nyaga said.
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