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General Accident to raise $417 million by listing

General Accident to raise $417 million by listing

GENERAL Accident Insurance Company aims to raise up to $417 million through an initial public offering (IPO) of 206,250,000 ordinary shares on the Jamaica Stock Exchange (JSE) Junior Market on September 28.

In its prospectus posted yesterday, the firm said it has set a share price of $2.02 per share. Some 77.7 million shares in the Invitation are initially reserved for directors, senior managers and employees of the company, among others.

Mayberry Investment Limited is the lead broker in the listing.

General Accident, which provides property, casualty and general insurance products, said it intends to use the proceeds of the listing to improve regulatory capital and liquidity for growth; increased marketing and brand awareness; and pay the expenses of the Invitation.

The firm said it will use the bulk of the proceeds of the Invitation, after payment of related expenses, to purchase investment securities that comply with the regulatory requirements set out in the Insurance Act and the Insurance Regulations, 2001.

"The Directors believe that if the company makes such investments it will improve its capital adequacy and liquidity position for regulatory purposes. They also believe that the making of such investments, together with the company's recent divestment of the bulk of its holdings in Seprod will increase its regulatory capital to a level in excess of the minimum benchmarks prescribed by the Financial Services Commission," the prospectus said.

"The Directors also believe that this position will enable the company to continue its growth trajectory," it said.

The company intends to use a part of the proceeds of the Invitation, after payment of related expenses, to increase awareness of its brand and marketing of its products.

"Such efforts will include campaigns and reward schemes directed at prospective customers of the company, and others directed at insurance brokers who originate business on its behalf," noted the document.

Part of the proceeds of the listing will go to pay the expenses associated with it, not expected to exceed $20 million (inclusive of brokerage and financial advisory fees, legal fees, accountant's fees, filing fees, initial listing fees, underwriting fees, marketing expenses, and GCT).

The company noted that a Junior Market listing will enable it to take advantage of the special concessionary tax regime, provided that the company remains listed on the JSE's Junior Market and/or Main Market for 15 years. In its first five years on the Junior Market, the company will not be liable to pay any corporate income tax. In years six to 10 on the Junior Market, the company will only be liable to pay corporate income tax at half the usual rate. The prospectus added that the company directors intend to pay an annual dividend of not less than 25 per cent of net profits available for distribution.

General Accident Insurance started business in 1981 as a joint venture between Musson (Jamaica) Limited and General Accident Fire & Life Assurance Corporation of the UK. In 1998, the company became a wholly owned subsidiary of Musson (Jamaica) Limited, retaining the General Accident brand.

The firm's gross written premiums totalled $2.2 billion at the end of financial year 2010 -- Commercial Property premiums represented 39 per cent or the bulk of those written, followed by motor (28 per cent), employee liability (12 per cent) and home owners (five per cent). Net profit for the period was $153.2 million, a marginal decline from the corresponding period the year prior.

The General Accident board of directors is chaired by P B Scott, who is also chairman, CEO and principal shareholder of the Musson Group. The company's managing director is Sharon Donaldson, who has been with the company for over 20 years.