About seven underwriting firms have approached their investors to raise a cumulative N50 billion fresh capital as the June 2020 recapitalisation deadline given to insurance companies in Nigeria to upgrade their share capital to a new threshold draws nearer.
LEADERSHIP investigation shows that the concerned insurance companies have utilised their 2018 Annual General Meetings (AGMs) as well as Extra Ordinary General Meeting(EGM) platform to seek and receive approval of their respective shareholders to go ahead and raise capital base to meet the new regulatory benchmark.
The seven underwriters are: Cornerstone Insurance Plc, WAPIC Insurance Plc, LASACO Assurance Plc, Consolidated Hallmark Insurance Plc, Sunu Assurances Nigeria Plc, AIICO Insurance Plc and Sovereign Trust Insurance Plc. The likes of Royal Exchange Plc, Linkage Assurance Plc, Anchor Insurance Limited, Saham Unitrust Insurance Plc, Universal Insurance Plc, Guinea Insurance Plc, Industrial and General Insurance (IGI) Plc, Great Nigeria Insurance (GNI) Plc, among others, LEADERSHIP learnt, are also talking to new and existing investors while few of them are mooting the idea of mergers and acquisition. While some of the earlier seven insurers mentioned have already approached the Nigerian Stock Exchange (NSE) to raise fund through the capital market, few of them will, in the next couple of weeks, approach NSE for approval of their Offers, having earlier gotten the National Insurance Commission (NAICOM) approval to proceed with their recapitalisation plans.
The seven companies are currently persuading their existing shareholders to upgrade their shareholding while appealing to new investors to see their respective firms as the next investment hub.
LEADERSHIP findings revealed that the concerned firms want to upgrade capital through public or private investors or both, as some had begun share reconstruction plans to actualise this move.
NAICOM had earlier ordered insurance companies with composite licence to upgrade their capital base from N5 billion to N18 billion to continue to underwrite life and non-life insurance businesses in the country. Life insurance firms were required to increase their minimum capital requirement from N2 billion to N8 billion, amounting to 400 per cent increase in their capitalisation.
Similarly, General insurance companies are to raise their capital base to N10 billion from N3 billion to continue to exist in insurance industry, even as Reinsurance Firms will now need N20 billion capital base to operate Reinsurance business in the country, unlike N10 billion they were operating with, prior to now.
It was to this end, that the earlier listed firms began their recapitalisation plan, hoping to have concluded all necessary work, before the deadline date. The shareholders of WAPIC Insurance Plc has authorised the company to raise its authorised share capital to N18 billion for its Life and General businesses from the current N8.5 billion, meaning that, the insurance firm is looking for about N9.5 billion.
Consolidated Hallmark Insurance (CHI) plans to raise its capital base from N6.1 billion to N10 billion by way of rights issue, hence, needing to raise additional N3.9 billion. LASACO Assurance Plc has approached and gotten its shareholders’ approval to raise additional N10 billion capital.
The N10 billion additional capital, when added to its current shareholders fund of over N8 billion, will allow the assurance company hit N18 billion capital base benchmark as a composite insurer in the ongoing recapitalisation exercise.
AIICO Insurance Plc has received shareholders’ approval to increase its Authorised Share Capital from N10 billion to N18 billion. This, according to the insurer, was in line with its preparedness to meet the new minimum capital requirement for Composite Insurance license, which AIICO is currently operating with, in the ongoing recapitalisation exercise of the insurance industry.
SUNU Assurances Nigeria Plc, is already exploring about N6 billion rights issue to raise its capital base beyond the current N7bn authorised share capital, which will allow the insurer to underwrite all classes of general risk business.
The shareholders of Cornerstone Insurance Plc have authorised its Board of Directors to raise additional N10 billion capital in a bid to meet the recapitlisation deadline of June 30, 2020 for the insurance industry in the country.
The chairman, Sovereign Trust Insurance (STI) Plc, Mr Oluseun Ajayi, said, the firm’s mandate to scale up capital base is already at an advance stage, stressing that the programme for capitalisation will take off with the issuance of rights to existing shareholders of the company.
The company, according to him, will be issuing a total of 4.17 billion ordinary shares to its esteemed shareholders, adding that the decision will be finalised by the third quarter of this year.
To this end, NAICOM, yesterday, hosted an interactive session with shareholders associations with interest in insurance companies, where the regulator explained the motive of the recapitalisation exercise, urging the shareholders to support their respective underwriters in a bid to upgrade their respective share capitals.
The acting commissioner for Insurance, Mr Sunday Thomas, had earlier said, the ongoing recapitalisation exercise will lead to a financially solid, vibrant, viable and active insurance market that would bring about not only an increase in penetration but a substantial increase in the industry’s contribution to GDP. This, he stressed, will also stimulate accumulation of long-term funds for infrastructural financing, job creation, and an improved Return on Investment (RoI).
President, Chartered Insurance Institute of Nigeria (CIIN), Mr Eddie Efekoha, commended NAICOM for initiating the exercise, pledging operators’ support for the exercise which he believes will help grow the sector. Saying that high foreign exchange rate and low capacity of some underwriters necessitated the exercise, he added that, “If these are the main reasons for the recapitalisation exercise, the truth of the matter is that the exchange rate that applied in 2005/2007 is not the same in 2018/19. Secondly, if the exchange rate has changed, our ability to retain businesses has weaken. Should we enhance it? Yes! I think we should enhance it.”
On his part, president, Institute of Loss Adjuster of Nigeria (ILAN), Mr Femi Hassan, said, Loss Adjusters want the recapitalisation to take place because it would allow operators to put some structures in place that will help to grow the industry.
Moreover, executive secretary, Nigerian Council of Registered Insurance Brokers (NCRIB), Mr Fatai Adegbenro, stated that the industry really need sufficient capital to meet the present business realities, while meeting their respective civic responsibilities, which is, settlement of genuine claims.