Insurers struggle to sell shares at discounted rates

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Chuks Udo Okonta

Insurance companies seemed to be facing herculean task in getting ordinary shareholders take up their share rights at discounted rates, Inspenonline can report.

Findings from shareholders revealed that the ordinary equity holders are not taking up the rights presented by some firms at discounted rates. The Stock market rates of most insurance firms are presently below 50 kobo, and companies have told their shareholders to pick up their rights at 50 kobo per share.

One of the shareholders told this medium that it is only the major shareholders, that are presently injecting fresh funds in their firms.

Another shareholder said he not sure of any ordinary shareholder that is presently taking up the rights at discounted rates.

An insurance chief executive officer, who spoke on condition of anonymity, had said going to the capital market might not really be the best option for now due to shareholders apathy for insurance stocks.

“Capital market would have been another good option but it won’t work because people won’t buy insurance company shares. People buy shares when there is speculation that there will be better returns on investment. It is not so for a company that has been suffering losses for some time,” he said.

Another CEO had said foreign injection of funds seemed to be the panacea for most companies that are in need of capital to meet the regulatory threshold.

In recent times some companies have sold some of their stakes to foreign firms, which had also helped shore-up their capital.

One of the firms is Royal Exchange Plc, which announced 39.25 per cent acquisition in its general insurance subsidiary, Royal Exchange General Insurance Company (REGIC) by the InsuResilience Investment Fund (IIF), established by the German Development Bank (KfW) and managed by by Swiss based Impact Investment Manager, BlueOrchard Finance Investment Limited (“BlueOrchard”).

The acquisition, the firm said resulted in a N3.6billion capital injection into the Royal Exchange General Insurance (REGIC) which was in line with the National Insurance Commission’s (NAICOM) directive for insurance companies to increase their share capital in line with the new regulatory requirements recently introduced.

Moreso, Verod Capital Management has received regulatory approvals for its acquisition of 100 per cent of the shareholding of Metropolitan Life Insurance Nigeria from South African-based Momentum Metropolitan Holdings.

The transaction, for an undisclosed amount, sees Momentum Metropolitan exit the Nigerian market, in line with its articulated Reset and Grow strategy.

Having closely monitored these developments over the last several years, Verod sees significant opportunities within the sector and believes that this inflection point is the right time to enter the market and that Metropolitan Life Nigeria presents a solid platform for rapid growth.

“Low levels of insurance penetration, even compared to other African economies, point to untapped opportunities within the sector,” said Eric Idiahi, Partner at Verod, pointing out that, “NAICOM, the insurance regulator, has made concerted efforts towards creating an enabling environment; we believe that these actions, in addition to product innovation supported by increased public awareness and investments in technology-driven distribution channels, are the triggers that this sector needs to close the insurance penetration gap.

NAICOM had said that in keeping with the recapitalisation roadmap, it had concluded review of the submissions made by companies and had communicated individual companies on their positions.

“Further to the circular issued by NAICOM on May 20, 2019 increasing the paid up share capital of Insurers and reinsurers in Nigeria and, the subsequent directives to companies to submit their recapitalization plans by August 20, 2019 the Commission hereby notifies all insurance stakeholders that it received plans of 47 insurers and 2 reinsurers,” it said.

According to the insurance industry regulator, 26 companies have been granted “No Objection ” to proceed with their plans; the plans of 17 companies were corrected and have been advised to resubmit their new plans using paid-up capital and not shareholders fund; four companies do not have the requisite 2018 financial statements and are thus, advised to review their plans of using IPO; one company has litigation issues and has been advised to resolve them as soon as possible to enable its progress and one company’s submission was noted to have met the necessary requirements

NAICOM maintained that the review of submissions from two companies is ongoing while while three companies are yet to submit their recapitalization plans.

NAICOM noted that it is resolved to adhere to the recapitalisation roadmap towards achieving its desired objectives in the best interest of all stakeholders.

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