Four insurance companies are finalizing arrangements to raise about N20 billion in new equity funds from existing and new investors as insurers step up efforts to meet new minimum capital requirements and strengthen their positions ahead of expected industry consolidation.
The four insurance companies – Prestige Assurance Plc, Consolidated Hallmark Insurance, AIICO Insurance and Sunu Assurances Nigeria Plc are raising about N20 billion in the next round of capital raising by insurers.
The companies are mostly sourcing for the new capital from existing shareholders, a traditional method for most companies in the recent period.
Authorities at the Nigerian Stock Exchange (NSE) at the weekend indicated they have approved the new capital raising by Prestige Assurance and Consolidated Hallmark Insurance.
Prestige Assurance is seeking to float a rights issue of 13.47 billion ordinary shares of 50 kobo each at par value of 50 kobo with a view to raising N6.74 billion from existing shareholders.
The rights issue will be pre-allotted on the basis of five new ordinary shares of 50 kobo each for every two ordinary shares of 50 kobo each held as at the close of business Friday, January 31, 2020.
In preparation for the new capital raising, Prestige Assurance had created additional new 14 billion ordinary shares by increasing its authorised share capital from N3 billion of 6.0 billion ordinary shares of 50 kobo each to N10 billion of 20 billion ordinary shares of 50 kobo each.
The New India Assurance Company Limited, Mumbai, the precursor and founder of Prestige Assurance, is expected to provide more than two-thirds of about N4.7 billion of the new capital raising.
The New India Assurance Company Limited, Mumbai holds 69.50 per cent majority equity stake in the Nigerian subsidiary while Leadway Assurance Company, an unlisted Nigerian insurance company, holds 11.47 per cent equity stake.
Consolidated Hallmark Insurance has received approval to raise new capital through a rights issue of 2.03 billion ordinary shares of 50 kobo each at 52 kobo per share.
In the tradition of the rights issue, the new shares to be offered for sale will be pre-allotted to shareholders on the basis of one new ordinary share of 50 kobo each for every four ordinary shares of 50 kobo each held as at the close of business on Monday, February 03, 3020.
Consolidated Hallmark Insurance is expected to raise N1.056 billion through the rights issue in what appeared to be the first round of multiple capital raising programmes of the insurance company.
Shareholders of AIICO Insurance and Sunu Assurances Nigeria are scheduled to meet early next month to consider and approve new rights issues.
AIICO Insurance plans to raise up to N3.5 billion in new equity funds from existing shareholders while Sunu Assurances plans to raise N8 billion through any of the various capital raising methods.
AIICO Insurance’s share price closed weekend at 82 kobo per share while Sunu Assurances closed at 20 kobo per share.
Under the capital raising plan, Sunu Assurances plans to create the headroom for new share issuance through a share reconstruction that will cancel four out of five ordinary shares held by shareholders.
With these, a total of 11.2 billion ordinary shares of 50 kobo each will be cancelled, reducing the company’s issued share capital to 2.80 billion ordinary shares.
Insurance companies are in a hot race to raise new equity capital to meet new minimum capital requirements for various insurance functions as directed by the National Insurance Commission (NAICOM).
NAICOM had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level.
The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.
Many insurance companies had recently raised new equity capital in what was regarded as the first round of the capital raising session for the industry.
Wapic Insurance recently closed application list for N5.9 billion rights issue. It offered 15.61 billion ordinary shares of 50 kobo each to existing shareholders at 38 kobo per share.
The rights issue was pre-allotted to shareholders on the register of the insurance company as at the close of business on Thursday, September 19, 2019, on the basis of seven new ordinary shares of 50 kobo each for every six ordinary shares of 50 kobo each already held.
Sovereign Trust Insurance (STI) also raised N2.09 billion through a rights issue. STI offered 4.17 billion ordinary shares of 50 kobo each at a price of 50 per share.
As rights, the new shares issued were pre-allotted on the basis of one new share for every two ordinary shares held as at the close of business on January 15, 2019.
Many other insurance companies including Universal Insurance and Niger Insurance have also launched preliminary processes in their quest to raise new capital, in what may form the third round of capital raising under the current recapitalisation programme.