‘Why insurers’ shares are difficult to sell at stock market’
• Foreign firms begin acquisition of weak local operators
Underwriting companies in the country are facing the difficult task of getting ordinary shareholders to take up their rights issue, even at discounted rates.
Findings from shareholders in the industry revealed that the ordinary equity holders are not taking up the rights presented by some companies at discounted rates.
The stock market rates of most insurance companies 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, who spoke with The Guardian, explained that it is the major shareholders that are presently injecting fresh funds in their insurers under the recapitalisation exercise.
Another shareholder who also wants to remain anonymous said he is not sure of any ordinary shareholder that is presently taking up the rights at discounted rates.
A top executive of an insurance company, 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 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,”the top executive said.
The market observer, who was engaged by The Guardian over the weekend, said foreign injection of funds seemed to be the panacea for most companies that are in need of capital to meet the regulatory threshold.
According to him, in recent time, some companies have sold some of their stakes to foreign companies, which had also helped shore-up their capital.One of the companies is Royal Exchange Plc, which announced 39.25 per cent acquisition in its general insurance subsidiary, Royal Exchange General Insurance Company, by the InsuResilience Investment Fund (IIF), established by the German Development Bank (KfW) and managed by Swiss-based Impact Investment Manager, Blue Orchard Finance Investment Limited.
The acquisition, the company said resulted in a N3.6 billion capital injection into the Royal Exchange General Insurance, which was in line with the National Insurance Commission’s directive for insurance companies to increase their share capital.
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 for 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 has made concerted efforts towards creating an enabling environment and 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,” he added.
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 three companies are yet to submit their recapitalisation plans.
NAICOM noted that it is resolved to adhere to the recapitalisation road-map towards achieving its desired objectives in the best interest of all stakeholders.