By ZAKA KHALIQ, Lagos –
The expectation of six insurance companies ready to raise about N22 billion capital from the Nigerian Stock Exchange(NSE) may suffer a set back as there are indications that shareholders, especially the retail ones, are not ready to buy insurance shares, LEADERSHIP can exclusively reveal.
The reason for this stance could not be unconnected to the fact that most of the listed underwriting firms have failed to declare meaningful dividend on bonus to their respective shareholders in the last five years, even as the stocks are now selling at par value, hence, the shareholders could not get good returns on their investments.
Findings carried out by Leadership show that most existing insurance shareholders are still embittered that the shares they withhold is a worthless paper.
For more than a year, the shares of most of the 26 listed insurers had witnessed little or no activities with the existing shareholders ready to sell but no buyer.
An anonymous shareholder, who spoke to Leadership at the weekend said, “When I bought the shares of about four insurance companies, they were trading around N2, but now, they are trading at 50 kobo. That is 400 per cent loss on these shares. But, nevertheless, I still want to sell, but no buyer for the last one year or so.”
Coming to the market to raise fund at a time the confidence level of insurance shareholders is low, she said, is beyond reasoning, as she felt most of the insurance stocks have failed to declare meaningful dividend or bonus to shareholders in the last four to five years to be able to woo them to invest more in their companies
Insider source disclosed that most of these insurers will have to rely on their private investors and corporate shareholders to meet the required capital benchmark set to raise, even though, this might not be easy as well..
Already, WAPIC Insurance PLC, Sovereign Trust Insurance (STI) PLC, Consolidated Hallmark Insurance PLC, Royal Exchange PLC, Mutual Benefits Assurance PLC and Law Union and Rock Insurance PLC have concluded plans to raise a cumulative N22 billion through public offers, rights issue and private placement respectively.
WAPIC Insurance PLC, on its part, plans to raise N10 billion with STI Plc aiming to raise N2 billion, even as Consolidated Hallmark Insurance PLC plans to raise N2.5 billion additional capital or its equivalent whether locally or internationally or a combination of both.
Royal Exchange PLC wants to raise N3 billion from the capital market, while Law Union and Rock Insurance PLC wants to raise additional capital by way of private placement to the tune of 1,031,199,000 ordinary shares of N0..50 Kobo at N0.70 Kobo per share, requisite regulatory approvals were obtained for the placement issue.
Moreover, Mutual Benefit Assurance Plc has said that it will be raising additional capital of N2billion through right issue come November 2017.
The rush by the insurers to raise fund from the capital market, investigation reveals, was to allow them recapitalise and become stronger to play active roles in insurance market by the time the new supervision model, that is, Risk Based Supervision(RBS) kicks off in the country, next year
Speaking in an exclusive interview with Leadership yesterday, the Chief Executive, Lancelot Ventures Limited, Mr. Adebayo Adeleke warned the retail shareholders to thoroughly examine the financials of the companies coming to raise fund to ensure that they can give good returns on investments. A shareholder who fails to do his background checks on the company he is investing in, is on his own, he said.
Adeleke, who was a former General Secretary of the Independent Shareholders Association of Nigeria(ISAN), said, the companies, whether they are insurance companies or not, have the right to come to the market to seek to increase their tier 1 capital, having gotten regulatory approval from the regulators concerned.
“It is now left for the buyer to decide whether to buy or not because nobody is forcing you to buy. As a buyer, you should be able to analyse the five years previous accounts of the companies, looking at the integrity of the directors of the companies, their business track record and use it to project whether the companies can give good returns on investment in the near foreseeable future or not.”
He, therefore, advised the retail shareholders to be watchful before they put their hard earned money in the shares of any insurance company, so that they don’t regret their decision later.
Speaking on behalf of insurance firms’ shareholders in an interview with Leadership, the President, Progressive Shareholders Association of Nigeria(PSAN), Boniface Okezie said insurance stocks are unhealthy for shareholders for some years now as they were unable to give good returns on investment, noting that this was the reason why their prices have remained at par value.
He said shareholders react to the results a company releases, its dividend payout, its future prospect, saying insurance companies have failed in all these.
“So, where do you expect the price to go? The price would remain as it is. It is the dividend payout that throws up the prices, and so long as you don’t pay a commensurate dividend to the shareholders, that is what you get,” he said.
He believes Insurance Firms are the architect of their misfortune, saying, the money they use to pay fines on a yearly basis can comfortably give meaningful dividend to shareholders.
He called on underwriters to give adequate information on their operations to the public, and try as much to impress the existing shareholders to ensure that insurance stocks witness price appreciation.
In a bid to ensure that stronger insurance firms emerged in the country, the National Insurance Commission(NAICOM) is coming up with a Risk Based Supervision(RBS) framework that will mandate insurance operators to operate within their capital limit.