Acquisition Signal – Jamaica Observer

This General Accident Insurance Company Jamaica Limited (GENAC) appears to be on the verge of another acquisition as it plans to seek shareholder approval to issue new common and preference shares in the coming weeks.

The news was revealed on Wednesday when the company published a new notice of general meeting (AGM) that included new special business resolutions. GENAC’s original AGM date was scheduled for September 13, but it was moved to November 6 at 9:00 a.m.

The first special item is an attempt to increase the maximum number of directors who can serve on the company’s board from 12 to 15. General Accident’s current board consists of 11 directors, with Paul B. Scott serving as chairman, Melanie Subratie serving as vice-chairman and Sharon Donaldson-Levine serving as the company’s managing director.

The second special item is intended to increase the company’s authorized share capital from 1.1 billion ordinary shares to 1.4 billion through the creation of an additional 300 million new ordinary shares. The current issued share capital of General Accident is 1,031,250,000 ordinary shares, 80 percent of which is held by Musson Jamaica Limited.

The third special item is to increase the authorized share capital of the company by creating 10 million new redeemable preference shares, which will be known as the 2024 Redeemable Preference Shares. These shares will be allotted and issued on such terms to such persons as the board of directors may determine. There is also a second part of this special item, which provides for the company’s option, at any time, to redeem these redeemable preference shares and at such issue price as the board of directors may determine.

GENAC is currently one of the two largest insurance companies in Jamaica, alongside British Caribbean Insurance Company Limited (BCIC). Donaldson-Levine says the company has a 25 percent market share. It also operates in Barbados, where it has an 80 percent subsidiary, and Trinidad and Tobago, where it has a 75 percent subsidiary.

The company began its regional expansion in September 2019 when it acquired 55 percent of Motor One Insurance Company Limited, a Trinidadian insurance company, while Micon Marketing Limited acquired the remaining 45 percent stake. It then began operations in Barbados from scratch in March 2020.

The company delisted from the Junior Market on the Jamaica Stock Exchange (JSE) in September 2023, two years after the tax exemption expired. The move to the Main Market opened up new opportunities for the company to enter into new deals or raise capital, as it was limited to the Junior Market’s share capital limit of $500 million when its issued share capital was already $470.36 million.

During Mayberry Investments’ investor forum on Sept. 4, Donaldson-Levine said GENAC is considering further regional expansion.

The Ernst & Young document found that General Accident Insurance Company (Trinidad) Limited was the smallest general insurance company in the market, with gross premiums of TT$29.2 million in 2021. The five largest general insurance companies at the time — Guardian General Insurance Limited, Colonial Fire and General Insurance Company Limited, CG United Insurance TT Ltd (formerly Massy United Insurance), The Beacon Insurance Company Limited and Sagicor General Insurance Trinidad and Tobago Limited — controlled 64 per cent of the market.

“The acquisition of AS Bryden in Trinidad allowed GENAC Trinidad to grow much faster than we had planned. So when we bought the company, it was in receivership and managed by the Central Bank of Canada. We actually turned a profit after three years because the acquisition of AS Bryden gave us some critical mass. So we were able to underwrite their business,” Donaldson-Levine said at the Mayberry event.

AS Bryden & Sons Holding Limited was acquired in June 2022 by Seprod Limited, another company managed and controlled by PB Scott. AS Bryden acquired Micon Holdings Limited, which was also the parent company of Micon Marketing, by issuing new common shares in AS Byrden to the former owners of Micon Holdings – Michael, Beverly, Gerard and Juliet Conyers and Stony Hill Capital Limited – in November 2022.

A check of the Trinidad registry showed that GENAC (Trinidad)’s shareholding increased from 65 to 75 percent in 2022, with Michael and Gerard Conyers holding 12.5 percent and Susan Scott the remaining 12.5 percent. Both Michael and Gerard Conyers sit on the board of the Trinidad subsidiary.

In the second quarter (April to June) of 2024, Michael Conyers became the fifth largest shareholder of General Accident Jamaica with 9,337,457 common shares or 0.9055% of the company. Michael Conyers is the vice-president of AS Bryden and holds 90,103,014 common shares or 6.48% of the company.

GENAC Trinidad reported insurance revenues of US$1.31 billion (TT$56.80 million) in 2023, an improvement of 69%, but net profit was compressed by 82% to US$42.10 million (TT$1.83 million). GENAC Barbados was able to increase insurance revenues by 51% to US$564.97 million (BDS$7.29 million) and limit net loss to US$12.17 million (BDS$156,940 million).

As 2023 is a transition year in the implementation of the IFRS 17 standard, which replaced IFRS 4 for reporting insurance revenues, the results may turn out to be higher or lower compared to 2022.

During the event, Mayberry Donaldson-Levine revealed that his company had set its sights on Guyana.

“Like everybody else, since Guyana has found oil and is about to boom, we’d like to go to Guyana. We’d actually like to go to the rest of the Caribbean islands. So we’d like to look at St. Lucia; we really like St. Lucia. We really like Grenada. (General) insurance companies in Grenada are doing really, really well. They have excellent risk assessment techniques in Grenada. Those are the next two countries we’d like to expand to,” Donaldson-Levine said.

GENAC’s standalone insurance revenues rose 22 percent to $6.75 billion, with net income from insurance services at $585.58 million in 2023. However, net income from insurance and investments remained unchanged at $816.01 million, with net income down 13 percent to $524.43 million. Its Jamaican asset base improved to $7.87 billion, with $2.02 billion in investment securities and $661.04 million in cash, while its capital base improved to $3.57 billion.

While the potential takeover target is unknown, the opportunity could also lie with Jamaica and 10 other general insurers in the market. Although the stock price fell to $6.90 last Thursday, the shares are set to rise 42 percent in 2024 with a market capitalization of $7.12 billion.

The acquisition does not necessarily involve GENAC raising new equity capital from an equity increase, but may also involve the issuance of shares by the selling company to the acquisition target. A similar transaction was completed with Productive Business Solutions Limited (PBS) and PBS Technology Group Limited in September 2021.

Musson Group and related entities are actively pursuing a number of acquisitions in 2024, with AS Bryden on July 9 acquiring a 44.8 per cent stake in Caribbean Producers (Jamaica) Limited, a company with a subsidiary in Saint Lucia.

Additionally, in early 2024, PBS acquired a 45 percent stake in Trinidad Systems Group Limited.

Scott and Donaldson-Levine joined the board of Atlantic Hardware and Plumbing Company Limited earlier this year.

GENAC’s half-year results showed consolidated insurance revenues rose 15 percent to $5.37 billion, but increased insurance service expenses and reinsurance costs caused net insurance service income to decline 53 percent to $174.65 million. Despite higher investment income and other operating income, GENAC’s consolidated net profit fell 35 percent to $159.11 million, while net profit attributable to shareholders was $150.53 million.

GENAC’s consolidated asset base increased 23 percent in the six months to $12.04 billion, with investment securities at $3.50 billion and cash at $1.47 billion. Total liabilities and equity attributable to shareholders were $7.92 billion and $3.76 billion, respectively.

On September 13, 2024, General Accident Jamaica sold its shares in Eppley Caribbean Property Fund Limited SCC – Value Fund to Eppley Fund Managers Limited for $46, for gross proceeds of $440.25 million, a gain on the $42.99 the company paid for the shares from Musson Investments Limited in July 2023. GENAC is also one of the 10 largest shareholders in Stanley Motta Limited, the company that owns 58 Half-Way-Tree Road, and PBS, another company controlled by Musson.