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CIC to sell 512-acre Kajiado land to lift capital position
Although CIC has not revalued its land holdings for the last five years, the sale is expected to see it book huge gains on the assets it has held for 15 years.
CIC Insurance Group is set to sell three parcels of land totalling 512 acres in Kajiado, valued at Sh1.7 billion, as it seeks to restructure its balance sheet and improve cash position in deals that will see it book huge capital gains.
The listed insurer said it was selling two plots of land owned by its life insurance subsidiary, measuring 192 acres and 120 acres, valued at a combined Sh1.06 billion. It is also selling 200 acres held by its general insurance unit valued at Sh666 million.
Although CIC has not revalued its land holdings for the last five years, the sale is expected to see it book huge gains on the assets it has held for 15 years.
“The land was bought in 2010/2011 as a way of investment, so when you want to recapitalise you sell your non-core assets. You are better off selling and getting that money invested in near cash assets optimising the balance sheet,” said CIC's chief executive officer Patrick Nyaga.
“This is purely for optimising the balance sheet because the regulator, when checking capital adequacy, discounts land; so it doesn’t reflect capital value as near cash or cash,” said Mr Nyaga.
The group is also selling a 200-acre parcel of land in Kiambu, valued at Sh5.06 billion, to settle a Sh3.4 billion loan owed to its largest shareholder, Co-operative Bank.
Land assets
Land is discounted at 30 percent by the Insurance Regulatory Authority (IRA), which prefers insurers to hold their capital in liquid assets in order to have cash for settlement of claims.
CIC had been flagged for having too much capital concentration in real estate by South African rating agency GCR Ratings in its latest rating of the company.
“Capital quality is constrained by the high concentration in investment property, particularly a related-party transaction involving Kiambu land, which comprised 79.7 percent of capital at year-end,” said GCR Ratings.
CIC Insurance was accorded a financial strength rating of BBB with a stable outlook. A BBB rating indicates that the insurer has a good likelihood of timely payments on short-term obligations.
CIC disclosed that it was open to subdividing the Kajiado plots in order to sell them more quickly. The chief executive noted that, if subdivided, the Kajiado plots would be larger than the Kiambu ones, which have been divided into plots of half-acre and quarter-acre plots.
“For Kajiado it would be bigger, maybe one and three-quarter acres because of the market on that side,” said Mr Nyaga.
CIC has regional subsidiaries in South Sudan, Uganda and Malawi and offers general insurance and life assurance, which are checked as two different units by the regulator, requiring different capital adequacy ratios for each.
“All subsidiaries remained fully compliant with statutory capital requirements, and we expect capital adequacy ratio to be maintained within the current range, supported by positive retained earnings and improved property monetisation,” said GCR Ratings.
CIC has maintained a conservative dividend payout, which has helped it to grow its capital position. Last year, the insurer paid a dividend of Sh0.13 per share, being a 9.2 percent payout, having posted a net profit of Sh2.8 billion for the year ended December 2024.
