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RJR Group Could Be Facing Clear and Present Danger Reports State Group Hurting Financially

“SSL is however not convinced of a turnaround anytime soon, stating in its report that “RJR has not been able to contain its costs as they increased across the board in Q02 2008/2009. Therefore, SSL is not convinced that RJR will increase revenues and lower costs in the near future.”

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For most Jamaican media houses, the massive spending during the last election campaign was a welcomed blessing. Were it not for that well-timed shot in the arm, many media houses would be bleeding far more red ink today. With mounting operational expenses due to the high cost of electricity, transportation, gas and standby power plants at broadcast transmission sites, media houses globally are spending long hours brainstorming potential strategic solutions, for it has become increasingly clear that media is not for the weak of heart.

Word on the street is that Jamaican radio stations are hurting and hurting badly. Radio Jamaica Ltd. (RJR), the largest and most diversified of the electronic media houses, recently reported weak results for the second quarter and the six month period which ended September 30, 2008. The company posted an operating loss of Jamaica Dollars (JMD) 20.88mm compared to an operating profit of JMD 27.72mm; receiving a tax credit this period totalling JMD 14.76mm compared to being charged tax of 6.33mm previously. Nevertheless, RJR reported a net loss for the period of JMD 31.55mm compared to a profit of JMD 4.63mm previously.

Gary Allen, Managing Director for RJR, who recently took over the reins from long time Chairman and Managing Director Lester Spaulding, must be having sleepless nights as he struggles to find a new path from what must be viewed as clear and present danger. Shareholders’ Equity declined 3.62% to JMD 1.04B from JMD 1.08B. This decrease is mainly due to a 25% fall in unissued share capital to JMD 41.25mm from JMD 55mm, and a 4.34% decline in Retained Earnings to JMD 557.05mm from JMD 582.3mm.

Allen certainly has his work cut out for him. It’s because of the RJR Groups’ activity in the electronic media that you can view the performance and get a feel for how other media houses are faring.

RJR reported losses per share of JMD 0.0717, compared to earnings per share (EPS) of JMD 0.0233 previously. The organization attributes its loss to tropical storm Gustav, rising energy costs, transportation and insurance charges, as well as expenses incurred for the Olympics and World Cup qualifiers.

In a recently emailed report (17/11/08) from Michelle Hirst, Research Manager at Stocks and Securities Limited (SSL), headed by Managing Director Mark Croskery, it was noted that RJR started the year well, but has fallen hard during the first six months of 2008-2009, due to the current economic environment. RJR states that revenues from endeavours such as the World Cup qualifiers will be seen in its nine month 2008-2009 results.

SSL is however not convinced of a turnaround anytime soon, stating in its report that “RJR has not been able to contain its costs as they increased across the board in Q02 2008/2009. Therefore, SSL is not convinced that RJR will increase revenues and lower costs in the near future. The stock has a book value per share (BV/Share) of JMD 2.95. It is currently trading at JMD 3.20 with a price to book value (P/BV) of 1.08. RJR has been trending downwards for the past three years decreasing 46.67% from JMD 6.00 on October 3, 2005. SSL recommends investors SELL this stock at current levels of JMD 2.85 and up.”

Informed media sources indicate that TVJ led by General Manager Kay Osborne, which according to all recent media surveys is the number one and most viewed television station, is carrying the group, but the strain is beginning to tell on the operations. Radio brands are performing below budgets and the flagship station RJR94 is now dangerously lagging in media polls. Hitz 92FM is not working as planned and there are frantic moves to change the all sports and reggae music format. FAME is not as bad as the other two stations but still under performing.

According to the SSL email report, “Turnover at the media group increased 3.61% to JMD 785.44mm from JMD 758.08mm. However, in Q02 2008/2009, RJR reported a 2.63% decline in turnover to JMD 401.54m from JMD 412.4mm. RJR has attributed this decrease to the slowdown caused by Tropical Storm Gustav and the fact that prior year revenues included political advertising in the period leading up to the general elections. Other Operating Income climbed 89.15% to JMD 19.01mm from JMD 10.05mm.”

A closer inspection of the numbers by SSL indicates that RJR like other media houses is struggling to keep costs down. “Cost of sales increased 20.2% to JMD 356.22mm from JMD 296.35mm due to the increase in production costs for Rising Stars (the company states that revenues will be seen in Q03 2008/2009) and the impact of broadcasting rights associated with World Cup Football Qualifiers and the Olympics.”
As a result, Gross Profit declined 7.04% to JMD 429.22mm from JMD 461.73mm.

The SSL email goes on to report that distribution costs fell slightly to JMD 145.58mm from JMD 146.02mm, while these costs increased 2.42% in Q02 2008/2009 to JMD 75.44mm from JMD 73.66mm. The quarterly increase in distribution costs is because of changes made to the marketing department’s structure in an attempt to improve customer service.

Administrative Expenses saw a similar decline, falling minimally to JMD 166.53mm from JMD 167.7mm; however Q02 2008/2009 reported an increase in administrative expenses to JMD 90.25mm from JMD 82.74mm.

Back in April of this year, Gary Allen announced that the RJR Group was undergoing management changes aimed at implementing new strategic competitive adjustments in the media industry. The changes introduced were designed to improve profitability and increase market share, the effects of which are still to be felt.

Among the changes was the appointment of experienced programmer and former station manager for FAME FM, Francois St Juste, to the new position of
General Manager – Radio Services. In this new role, he assumed general management responsibilities for the following radio brands, RJR 94 FM, FAME 95 FM, and HITZ 92 FM.

Carlene Swaby was also appointed to the position of Marketing and Sales Manager for Radio Services, combining marketing and sales functions of the three radio stations under one manager. It wasn’t clear how this would have impacted the role and function of Gary Cole who was recently appointed Marketing Director and who according to many marketing insiders is still to make his mark.

The RJR Group News Centre was re-structured to extend its news dominance in the electronic media and to diversify news operations by establishing additional revenue streams. The company appointed experienced journalist and media manager, Milton Walker, to the position of Group Head, News and Current Affairs. Milton was formally with the CVM Group owned by Michael Lee Chin, and chaired by his brother Wayne Chin. Kathy Barrett was appointed, Deputy Group Head, News and Current Affairs. Other appointments in this department included Kerriann Lee to Television News Editor; Janice Budd Radio News Editor (acting); and Earl Moxam Special Assignments Editor.

Due to increased projects associated with TVJ’s growth in local programs and products, Michael Sharpe was reassigned from his role as Projects Manager in the News Centre, to the new position of Projects Manager for Television Jamaica Limited.

The launch of Reggae Entertainment Television (RETV) and Jamaican Network New (JNN) to gain national coverage, as well as to introduce RETV in more than ten Caribbean countries, also added to the rise in operating expenses. This coupled with the shakeup in the structure of senior management and the addition of an internal director impacted the bottom line during the period. (See related story in this issue)

These changes the company said will drive the implementation of several initiatives that will improve shareholder value and profitability in the group.

Footnote Directors Selling Shares: The Jamaica Stock Exchange (www.jamstockex.com) on Friday November 21, 2008 reported that Radio Jamaica Ltd. (RJR) has advised that a director sold 101,000 RJR shares between November 4, 2008 and November 11, 2008.
Also further advisory indicate that Radio Jamaica Ltd (RJR) has advised that a director has sold 170,509 RJR shares on December 3, 2008 and 9,663 RJR shares on December 4, 2008.

Source: Stocks and Securities Limited (SSL) notes from the financial results (except where noted, all comparisons are for the 6M period year over year):

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Scotiabank Group Jamaica Continues To Perform Well

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Scotia Group reports net income of $4.2 billion for the quarter ended January 31, 2025, representing an increase of $1.1 billion or 34.5% over the comparative prior period.

The Group’s asset base grew by $73.3 billion or 11% to $739.2 billion as at January 2025 and was underpinned by the excellent performance of our loan and investment portfolios.

In furtherance of our objective to continue to return value to our shareholders, the Board of Directors has approved a dividend of 45 cents per stock unit in respect of the first quarter, which is payable on April 17, 2025, to stockholders on record as at March 26, 2025.

Audrey Tugwell Henry, Scotia Group’s President and CEO gave the following comments. “Scotia Group has delivered another solid performance for the quarter, and I am very proud of our team for their unwavering dedication and consistent service delivery to our clients. These results signal a strong start to the second year of our five-year strategy, and our goal remains to become our client’s most trusted financial partner. We continue to promote the importance of a balanced financial portfolio which incorporates banking, insurance protection and wealth, and we are committed to offering the best financial advice, earning the right to be our clients’ primary financial institution and making it easier to do business with us.”

Business Performance

Scotiabank Continues To Perform Well With Each Business Unit Delivering Commendable Results For The Quarter.

Deposits by the public increased by $34.4 billion or 7.5% versus the corresponding period last year.

Total loans increased from $275.7 billion to $312.5 billion representing an increase of 13.3%. This includes a 12% increase in Scotia Plan personal banking loans and a 24% increase in mortgage loans. Commercial loans also increased by 5% over the prior year period.

Our insurance subsidiaries continue to make a valuable contribution to the Group’s results. Net Insurance Revenues at Scotia Insurance increased by $504 million or 96% year over year and Gross Written Premiums grew by 5%. Sales at our general insurance business, Scotia Protect, increased by 53% while Gross Written Premiums increased by 71% when compared to the previous period.

Scotia Investments continues to assist clients to build wealth and navigate the complexities of the financial markets. Assets Under Management at SIJL increased by 13.3% over the comparative period demonstrating the strength of our investment advisors and asset management team.

As we advance our growth strategy, we are very pleased to see the continued appreciation in our stock price which has shown steady improvement. This demonstrates significant investor confidence in the Group and we are proud to continue returning strong value to our shareholders through both consistent dividend payments as well as capital appreciation.

Group Financial Performance

Total Revenues

Total revenues excluding expected credit losses for the year ended January 31, 2025, grew by $2.2 billion to $17.1 billion reflecting an increase of 14.9% over the prior year period. This was primarily driven by the strong growth in our loan portfolio which led to an increase in net interest income of $1.1 billion or 10% as well as an increase in other revenue of 26.2%.

Other Expenses

Other income, defined as all revenue other than interest income, increased by $1.2 billion or 26.2%.
• Net fee and commission income for the period amounted to $2.2 Billion and showed an increase of $671.8 million or 42.9% and was primarily driven by the higher volume of client transactions and activities.
• Net insurance revenue increased by $503.8 million or 96.2%, driven by higher contractual service margin releases coupled with lower insurance expenses in keeping with the performance of the portfolio, as well as an increase in transaction volumes stemming from further deepening of our client relationships.
• Net gains on financial assets amounted to $197.2 million, reflecting a year over year increase of $67 million or 51.5%, given improved market performance. 5 OPERATING

Expenses

Operating expenses totaled $9.7 billion as at January 2025 and reflected an increase of $1 billion or 11.6% when compared to the prior period. Of note, annual asset taxes recorded during the quarter totaled $1.7 billion, an increase over 2024 of $102 million or 6.4%.

Excluding the reduction in the net pension credit on our defined benefit plans, operating expenses increased by $743 million or 8.1% year over year.

Additionally, our investments in technology also contributed to the increase in operating expenses, as the Group continues to expand on our digital capabilities geared towards simplifying and streamlining our processes to make it easier for our clients to do business with us. These investments have enhanced the overall efficiency of our operations and enabled us to generate increased revenues.

Capital

Shareholders’ equity available to common shareholders totaled $150.7 billion and reflected an increase of $29.3 billion or 24.1% when compared to January 2024. This was due primarily to the re-measurement of the defined benefit pension plan assets, higher fair value gains on the investment portfolio and higher internally generated profits partially offset by dividends paid.

We continue to exceed regulatory capital requirements in all our business lines, and our strong capital position also enables us to manage increased capital adequacy requirements in the future and take advantage of growth opportunities.

Audrey Tugwell Henry, Scotia Group’s President and CEO

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The LAB’s Strategic Shift: Embracing Content Creation Amidst Evolving Financial Landscape

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Limners and Bards Limited (The LAB) headed by Kimala Bennett Chief Executive Officer, has unveiled its unaudited financial statements for the first quarter ending January 31, 2025, showcasing a nuanced performance as the company navigates a strategic pivot towards content creation. This move aims to capitalize on the burgeoning global appetite for diverse, high-quality content.

Financial Performance Overview

The LAB reported a robust quarterly revenue of $286.1 million, marking a significant 30.4% year-over-year increase. This growth was primarily driven by gains in the Production and Media segments. Gross profit reached $100.5 million, a 13% uptick from the previous year, indicating sustained operational efficiency.

However, profit before tax experienced a slight decline of 3.6%, settling at $25.2 million. This downturn is attributed to the transition from a full income tax holiday to a 50% concession, following The LAB’s fifth year on the Junior Stock Exchange. Consequently, net profit for the period stood at $21.6 million, reflecting a 17.6% decrease compared to the prior year. Despite this, the company maintains a robust balance sheet and a stable cash position.

Segment Performance

Media: Generated $142.5 million in revenue.

Production: Contributed $101.0 million.

Agency: Accounted for $42.6 million.

The net profit margin declined by 5.4%, as revenue growth was led by the lower-margin Production and Media segments, compared to the higher-margin Agency segment in the prior period. The company anticipates an Agency rebound by Q3, aligning with industry’s seasonal fluctuations.

Strategic Investments and Asset Growth

The LAB’s asset base expanded by $178.0 million, driven by strategic investments in content development. This initiative positions the company for long-term growth and revenue diversification in the “Owned” content industry.

Current assets rose to $920.6 million, while cash and cash equivalents experienced a year-over-year decline of $89.2 million.

Accounts receivable increased by $118 million, mirroring strong revenue growth. Management remains focused on optimizing credit terms through active client engagement.

Shareholders’ equity strengthened to $660.1 million, a 5.8% increase from the prior year, underscoring the company’s financial resilience.

Transition Towards Content Creation

The LAB is strategically positioning itself to harness the escalating global demand for diverse and high-quality content. With major streaming platforms, including Netflix, projected to invest $18 billion in content in 2025—an 11% increase from 2024—the appetite for fresh storytelling is evident.

The company’s “FIVE in 25” initiative, aiming to produce five films by 2025, is progressing well. Two films have been completed, with active negotiations underway with buyers and distributors. By focusing on high-performing genres such as Christmas and romance, The LAB ensures its productions cater to proven audience preferences.

Industry Outlook and Viability

The global content market is experiencing unprecedented growth. Streaming services and traditional distributors are increasingly seeking diverse narratives that resonate with a global audience. This trend presents a significant opportunity for The LAB, as its productions offer unique Jamaican perspectives with universal appeal. Engagements at international events like NATPE Global 2025 have facilitated negotiations with major distributors and networks, enhancing the company’s visibility and positioning its films for broader distribution.

Implications for Shareholders and Investors

While the strategic shift towards content creation entails upfront investments and a gestation period before realizing returns, it aligns with global industry trends favoring diverse content. The LAB’s strong financial foundation, coupled with its proactive approach to content development and strategic partnerships, suggests a forward-thinking trajectory. Shareholders and investors can anticipate potential long-term gains as the company taps into new revenue streams within the expanding content market.

Conclusion

The LAB’s recent financial performance reflects the complexities of transitioning within a dynamic industry landscape. By embracing content creation and investing in strategic initiatives, the company demonstrates adaptability and a commitment to sustainable growth. As The LAB continues to evolve, its focus on delivering compelling, culturally rich content positions it to capitalize on emerging opportunities, promising value creation for shareholders and stakeholders alike.

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Jamaica Broilers Group Faces Major Financial Setback as US Operations Struggle; Stephen Levy Resigns

In a move that signals accountability at the highest level, Mr. Stephen Levy, President of JBG’s US Operations, has resigned from both the Board and the Company, effective May 3, 2025. Levy, who has been with Jamaica Broilers since 2002, played a pivotal role in growing the US segment’s annual revenue from a modest US$10 million to over US$250 million. His departure suggests he is taking responsibility for the recent poor financial results of the US operations.

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The Jamaica Broilers Group Limited (JBG) has reported a major financial shift for the quarter ending January 25, 2025, revealing a dramatic swing from profitability to loss. The company’s unaudited financial statements highlight a net loss of $1.1 billion for the current quarter, a stark contrast to the net profit of $1.3 billion reported in the corresponding period last year. This represents a significant $2.4 billion downturn in financial performance, prompting serious concerns about the group’s operational and financial stability, particularly in its US segment.

Revenue Growth Overshadowed by Rising Costs

Despite the overall revenue of the group increasing by 5% to $24.6 billion, up from $23.6 billion in the previous year, profitability has suffered significantly. Gross profit for the current quarter stands at $4.7 billion, marking a 21% decline from the $5.95 billion recorded in the same period last year. This discrepancy suggests that the cost of goods sold or other direct expenses have outpaced revenue growth, eroding the company’s margins.

Jamaican Operations: Hurricane Beryl’s Impact

Jamaica Broilers’ domestic operations also faced difficulties, with segment profits declining by 9%—from $5.964 billion last year to $5.4 billion this quarter. While total revenue for the Jamaican segment saw a marginal 0.5% increase over the prior nine-month period, the impact of Hurricane Beryl significantly affected profitability. Increased operational costs due to hurricane-related disruptions appear to be the primary reason for the decline, signaling vulnerability to environmental and economic shocks.

US Operations in Crisis: A Steep Decline

In a move that signals accountability at the highest level, Mr. Stephen Levy, President of JBG’s US Operations, has resigned from both the Board and the Company, effective May 3, 2025.

The most alarming financial downturn occurred in JBG’s US operations. The segment reported a profit of just $922 million this period, a sharp 69% decline from the $2.192 billion earned in the corresponding period last year—a staggering $2.1 billion shortfall. Notably, revenue for the US segment grew by 5%, indicating that the decline in profit is not due to a drop in sales but rather significant increases in operational expenses, lower profit margins, or one-time extraordinary costs.

Several factors have been identified as contributing to the decline in US operations:

Expense Management Issues: Ineffective cost controls have led to higher-than-expected spending.

Operational Control Deficiencies: Weaknesses in internal procedures may have resulted in inefficiencies and potential losses.

Hurricane Flooding Challenges: External disruptions due to severe weather conditions likely compounded the operational difficulties.

The combined effect of these challenges led to the substantial decrease in US segment profitability, raising concerns about long-term sustainability and resilience.

Corporate Response and Leadership Changes

Recognizing the gravity of the situation, JBG’s corporate management has taken decisive steps to address the financial downturn. The company has engaged external advisors to assess the issues and provide expert recommendations for corrective action. Additionally, JBG is undertaking a thorough review of operational controls to identify weaknesses and implement necessary reforms.

In a move that signals accountability at the highest level, Mr. Stephen Levy, President of JBG’s US Operations, has resigned from both the Board and the Company, effective May 3, 2025. Levy, who has been with Jamaica Broilers since 2002, played a pivotal role in growing the US segment’s annual revenue from a modest US$10 million to over US$250 million. His departure suggests he is taking responsibility for the recent poor financial results of the US operations.

During this transitional period, JBG President & CEO, Mr. Christopher Levy, will oversee US operations directly, ensuring that necessary corrective measures are implemented to restore profitability and operational efficiency.

During this transitional period, JBG President & CEO, Mr. Christopher Levy, will oversee US operations directly, ensuring that necessary corrective measures are implemented to restore profitability and operational efficiency.

Looking Ahead: The Road to Recovery

Jamaica Broilers Group now faces the challenge of stabilizing its US operations while reinforcing its financial health. The company’s commitment to engaging external expertise and reassessing operational frameworks suggests a strong intent to rectify existing issues. However, investors and stakeholders will closely monitor how effectively JBG can execute these turnaround efforts.

While the departure of Stephen Levy marks the end of an era for JBG’s US segment, it also signals a crucial moment of introspection and course correction for the group. The next few quarters will be critical in determining whether JBG can regain financial stability and rebuild investor confidence in its future prospects.

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Listing GraceKennedy Financial Group on the JSE

The acquisition and delisting of Key Insurance and the potential listing of GraceKennedy Financial Group on the JSE represent a transformative strategy. This approach not only streamlines the group’s organizational structure but also positions it to capitalize on emerging opportunities in the financial services industry, ultimately driving value for customers and shareholders alike.

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GraceKennedy Financial Group’s (GKFG) recent J$403.71 million bid to acquire the remaining 27% of Key Insurance Company Limited (Key) presents a pivotal opportunity for strategic restructuring within the GraceKennedy conglomerate.

Currently holding approximately 73% of Key’s shares, GKFG’s move towards full ownership could lead to significant organizational changes, including the potential delisting of Key from the Jamaica Stock Exchange (JSE) and the subsequent listing of GKFG.

Delisting Key Insurance from the JSE

Under the JSE Main Market rules, a company may be delisted if a single shareholder controls more than 80% of its listed shares . Should GKFG’s acquisition increase its stake in Key beyond this threshold, delisting becomes a probable outcome. This would allow GraceKennedy to integrate Key’s operations more seamlessly into its financial services division, enhancing operational efficiencies and strategic alignment.

 

Listing GraceKennedy Financial Group on the JSE

Introducing GKFG as a listed entity on the JSE’s Main Market could offer several strategic advantages:

Consolidation of Financial Services: Listing GKFG would enable the consolidation of GraceKennedy’s insurance, banking, and financial subsidiaries under a single holding company. This unified structure could streamline operations, reduce redundancies, and present a cohesive financial services portfolio to investors.

Enhanced Capital Raising Opportunities: As a publicly listed entity, GKFG would have direct access to equity markets, facilitating capital raising for expansion initiatives, strategic acquisitions, and technological investments. This access is crucial for staying competitive in the rapidly evolving financial services sector.

Increased Market Visibility and Investor Confidence: A publicly traded GKFG would likely attract a broader investor base, enhancing market visibility. Transparency associated with public listings can bolster investor confidence, potentially leading to a higher valuation and increased shareholder value.

Strategic Implications and Future Outlook

The potential restructuring aligns with GraceKennedy’s long-term vision of becoming a global consumer group by 2030, focusing on both food and financial services . By fully integrating Key Insurance into GKFG and positioning GKFG as a listed entity, GraceKennedy can leverage synergies across its financial services, drive innovation, and enhance customer offerings.

Moreover, this move could set a precedent for other conglomerates in the Caribbean, demonstrating the benefits of strategic realignment and market repositioning to achieve growth and operational excellence.

In conclusion, the acquisition and delisting of Key Insurance and the potential listing of GraceKennedy Financial Group on the JSE represent a transformative strategy. This approach not only streamlines the group’s organizational structure but also positions it to capitalize on emerging opportunities in the financial services industry, ultimately driving value for customers and shareholders alike.

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GraceKennedy Financial Group Moves to Fully Acquire Key Insurance

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GraceKennedy Financial Group (GKFG), the financial services division of GraceKennedy Limited (GK), has announced a J$403.71 million takeover bid to acquire the remaining 27% of Key Insurance Company Limited (Key). This strategic move reinforces GKFG’s commitment to expanding its presence in the general insurance market while driving growth and value for customers and shareholders.

GKFG, which currently holds approximately 73% of Key’s shares, is offering J$2.70 per share. The offer opens on March 24, 2025, and closes on April 22, 2025. Deputy CEO of GKFG, Steven Whittingham, who oversees GK’s insurance segment, highlighted the benefits of the acquisition, “This transaction aligns with GK’s strategy of unlocking value in the general insurance sector. By fully incorporating Key into GKFG, we can enhance efficiencies and strengthen our competitive position. Our focus remains on innovation, customer satisfaction, long-term stability, and delivering superior products and services.”

Grace Burnett, CEO of GKFG, emphasized GK’s longstanding commitment to general insurance, “GK has been serving general insurance customers for over 50 years. Since acquiring a majority stake in Key Insurance in 2020, we have significantly strengthened its operations and expanded its market reach. Key marked its 40th anniversary in 2022 and has built a reputation for reliability and excellence over the decades. We are dedicated to preserving that legacy while driving future growth for the business.”

GraceKennedy Group CEO, Frank James, noted that the move supports GK’s Vision, which includes a focus on expanding and enhancing the Group’s financial services and delivering strong shareholder returns.

“GKFG’s bid to acquire full ownership of Key underscores GK’s commitment to maximizing stakeholder value. The transaction is expected to unlock operational efficiencies, drive synergies, and enhance customer service, solidifying Key Insurance’s role within our Group.”

Key Insurance is currently listed on the Main Market of the Jamaica Stock Exchange (JSE).

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