CIC Insurance Group has tied the repayment of Sh3.4 billion loan from Co-operative Bank to sale of 200 acres of land in Kiambu County.
Co-op Bank, which has a 24.8 per cent indirect stake in CIC, wired the funds to the insurer to settle its Sh5 billion corporate bond in October 2019.
According to the insurer’s chief executive Patrick Nyaga, the loan is contingent on sale of the land which they are about to close.
“CIC is progressively retiring its debt, having settled all inter-company loans earlier this year,” he noted.
Nyaga said a few prospective buyers have shown interest in the land stating 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. 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,” he said.
CIC had initially planned to settle the bond using proceeds from sale of its 712 acres of freehold land that dragged, prompting it to take the loan from Co-op.
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.
Sale of the land holdings in Kajiado and Kiambu counties, if successful, will enable the insurer to strengthen its balance sheet.
The company could get upwards of Sh10 billion from the land transactions.
The company bounced back to profitability, posting a net profit of Sh259.5 million in the first half of this year.
This was an improvement from a net loss of Sh335.5 million that the listed insurer recorded in the same period last year owing to the adverse effects of the Covid-19 pandemic.
According to the company, the strong performance was boosted by growth in its investment returns.
The insurer credited its ongoing transformation agenda with the turnaround.