Quoted Insurance Firms Want N142.13bn Capital Raise
Following the recent increase in the minimum share capital of insurers by the National Insurance Commission, insurance firms listed on the Nigerian Stock Exchange need N142.13bn to meet the requirement.
The National Insurance Commission on May 20 issued a circular on the increase in the minimum paid-up share capital of all classes of insurers ― insurance and reinsurance companies ― with the exception of Takaful operators and micro-insurance companies.
The minimum capital base of life insurance companies was reviewed from N2bn to N8bn while that of general insurance companies was reviewed from N3bn to N10bn.
The capital base of composite businesses was reviewed from N5bn to N10bn and that of reinsurance businesses was reviewed from N10bn to N20bn.
NAICOM also barred regulated entities from borrowing money to meet the requirements. This leaves the firms with the options of merger and acquisition or capital raise by rights issue.
An analysis of the issued share capital of insurance companies showed that 24 of the 25 listed companies require an additional capital of N142.13bn.
Only African Alliance Insurance Company Plc had a share capital greater than the previous and new requirements.
Its share capital stood at N10.29bn, while the NAICOM requirement for its category (life insurance) stood at N8bn.
Aiico Insurance Plc, AXA Mansard Insurance Plc, Cornerstone Insurance Plc, Goldlink Insurance Plc, Lasaco Assurance Plc and Niger Insurance Plc are under the composite category,
With a share capital base of N3.465bn, Aiico Insurance now requires an additional N6.53bn to remain in composite business.
Aiico announced plans to raise additional N25bn through private placement, which it said would enable it to play in higher tier capital level in the insurance industry.
AXA Mansard needs additional N4.75bn as its current capital base stands at N5.25bn.
Cornerstone Insurance, Goldlink Insurance, Lasaco Assurance and Niger Insurance seek additional capital of N8.05bn, N8.77bn, N6.33 and N6.13bn respectively as their current share capital stands at N1.95bn, N1.23bn, N3.67bn and N3.87bn respectively.
Continental Reinsurance, the only listed reinsurance company, has a target of N20bn capital while it currently stands at N5.19bn. The company requires an additional N14.81bn.
Under general insurance, there are Consolidated Hallmark Insurance Plc, Guinea Insurance Plc, International Energy Insurance Plc, Law Union and Rock Insurance Plc, Linkage Assurance Plc, Mutual Benefits Assurance Plc, NEM Insurance Plc and Prestige Assurance Plc.
Others include Regency Assurance Plc, Sovereign Trust Insurance Plc, Staco Insurance Plc, Standard Alliance Insurance Plc, Sunu Assurances Plc, UNIC Doversified Holdings Plc, Universal Insurance Plc, Veritas Kapital Assurance Plc and Wapic Insurance Plc.
Consolidated Hallmark requires additional capital of N3.9bn.
The company revealed plans to raise its capital base from N6.1bn to N10bn by way of rights issue.
It said the additional capital would also be deployed to specific initiatives to accelerate growth and consolidate its leadership position and deliver exceptional returns to shareholders.
Guinea Insurance, International Energy Insurance, Law Union and Rock Insurance and Linkage Assurance require additional capital of N6.93bn, N1.5bn, N7.85bn and N6.01bn respectively as their current share capitals stand at N3.07bn, N8.5bn, N2.15bn and N3.99bn respectively.
With current share capital of N5.56bn, N2.64bn and N2.69bn, Mutual Benefits, NEM Insurance and Prestige Assurance are required to raise extra capital of N4.44bn, N7.36bn and N7.31bn, respectively.
Regency Assurance, with a capital base of N3.33bn requires additional capital of N6.67bn.
Sovereign Trust Insurance, Staco Insurance, Standard Alliance Insurance and Sunu Assurances require to raise N5.83bn, N5.33bn, N5.34bn and N3bn respectively.
Sovereign Trust’s current capital base stands at N4.17bn, while those of Staco Insurance, Standard Alliance and Sunu Assurances stand at N4.67bn, N6.46bn and N7bn respectively.
UNIC Diversified Holdings, Universal Insurance, Veritas Kapital and Wapic Insurance Plc, on their part, require additional capital of N8.71bn, N2bn, N3.07bn and N3.31bn respectively as their current share capitals stand at N1.29bn, N8bn, N6.93bn and N6.69bn respectively.
Coronation Merchant Bank, in its 2019 Insurance Industry report, said the new NAICOM requirement, which was scheduled to take effect not later than June 30, 2020 would bring about a wave of mergers and acquisitions.
It said NAICOM’s current reform of the insurance industry shared essential features with the 2004 reform of the banking industry under Prof Charles Soludo, then governor of the Central Bank of Nigeria.
The report read in part, “The result of 2004’s banking reform was to reduce the number of banks from 89 to 25. As we have already argued, 2020 could see the number of insurance companies fall from 59 to around 25.
“If some insurance companies are actually eliminated rather than consolidated by this process, then the survivors will enjoy market share gains.”
The Head of Research, Coronation Merchant Bank, Guy Czatoryski, said though the country was able to create financial inclusion, insurance had not been included in Nigeria’s financial inclusion story so far.
He said to position the insurance sector for radical growth, the lessons learned in Asian markets and West Africa must be considered.
Czartoryski described cooperation between regulators and distribution partnerships with banks and telecom companies as critical to the growth of the insurance sector.
He stated that though fresh capital was necessary for development, a fresh strategic approach was required to reach the industry’s potential.