Insurers upbeat about September 2021 recapitalisation deadline

The ongoing recapitalisation exercise in the insurance sector may be getting the required boost, as insurers articulate commitment to the exercise; saying a process is a form of corporate re-organisation, which involves making substantial changes to a company’s capital structure.

The insurance industry post-recapitalisation is expected to be robust and capable of taking big risks, as well as contribute meaningfully to the nation’s Gross Domestic Product.

Following the December 31, 2020 recapitalisation deadline given by the National Insurance Commission (NAICOM), to all insurance companies to upgrade their capital to a new threshold, only a few of the underwriters is showing readiness to scale through the exercise.

The regulatory body had earlier ordered operators with a composite licence to upgrade their capital base from N5billion to N18billion; Life insurance firms were required to increase their minimum capital requirement from N2 billion to N8billion, amounting to 400 per cent increase.

Similarly, General insurance companies are to raise their capital base to N10 billion from N3 billion, while Reinsurance firms will now need N20 billion minimum capital to operate in Nigeria.

Among few operators showing readiness for the recapitalisation exercise are: Linkage Assurance Plc, Mutual Benefits, Cornerstone Insurance Plc, Sovereign Trust Insurance Plc, NICON Insurance Limited, FBNInsurance, and Anchor Insurance Company Limited.

In an interview over the weekend, the Managing Director/Chief Executive Officer, Linkage Assurance Plc, Daniel Braie, told The Guardian their commitment in the industry has assured shareholders that despite the challenges posed by the impact of Covid-19, the firm is on course to meeting the recapitalization requirements.

The company disclosed that it is concurrently exploring all available options including Rights Issue, private placement, and internal capital sourcing to raise the required funds.

Insurance companies in the country have been in the process of raising capital as required by the National Insurance Commission (NAICOM) before the Covid-19 pandemic, which did not only affect the economy but disrupting the exercise as expected investors from both local and outside the shores of the country were affected.

Braie explained that the industry recapitalisation exercise, which commenced on 20th May 2019 and to end September 30th, 2021 as against recapitalization deadline earlier scheduled for December 31, 2020, requires that life companies increase their paid-up share capital from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion to N20 billion.

He assured the brokerage fraternity earlier in the year that his company will meet the new capital base of N10 billion.

According to him, in 2019 posted a Gross Written Premium (GWP) of N6.52 billion was recorded as against N5.39 billion during the same period in 2018, indicating a 21 percent increase.

In 2019, the company also recorded a Profit Before Tax (PBT) growth of 909 percent, moving from N135 million in 2018 to N1.36 billion during the review period.

Profit After Tax (PAT) also grew to N1.3 Billion, a 553 percent increase from a loss position of N290 million during the same period in 2018.

Underwriting profit rose by 153 percent to close at N409 million during the review period, as against loss position of N773 million the previous year, while investment also grew by 10 percent, moving from N2.46 billion in 2018 to N2.71 billion in 2019.

Those who cannot meet their obligations have no other option than to embrace mergers and acquisition to scale through the deadline.

Speaking with The Guardian over the weekend on this development, the Head, Strategic Marketing and Communications Department, AIICO Insurance Plc, Segun Olalandu, confirmed that the firm had earlier received shareholders’ approval to increase its authorised share capital to N18billion through various instruments to meet the new minimum capital base for composite insurance based on NAICOM’s guidelines.

Olalandu stressed that in compliance with the new minimum capital requirements, AIICO recently concluded a private placement with an uptake of 38.83 per cent of its shares by two strategic investors – LeapFrog Nigeria Insurance Holdings Limited acquired 28.24 per cent stake, while AIICO Bahamas Nigeria Limited acquired 10.59 per cent stake.

As a result, the paid-up share capital of the company has increased from N6.1billion to N11.3 billion, while it intends to raise the outstanding capital from existing.