While many insurance companies are yet to disclose their recapitalization plans as mandated by the National Insurance Commission (NAICOM) investigations reveal that only five have successfully crossed the new capital threshold.
It will be recalled that the National Insurance Commission (NAICOM) directed insurance companies to beef up their capital levels. Composite insurers license holders are to raise their capital to N18 billion from N5 billion, general insurers are to raise to N10 billion from N3 billion, while life license holders will raise to N8 billion from N2 billion and reinsurance companies will have to rise to N20 billion from N10 billion.
For composite companies, it was leant that Leadway Assurance has crossed the threshold with shareholders’ funds of N29.9 billion according to its 2018 financial result. Meanwhile, analysis of 2019 first-half financial results shows that Axa Mansard has also crossed the threshold with N22.5 billion.
Still, in the composite business segment, other companies that are close to crossing the benchmark are AIICO Insurance with N16.7 billion, as well as Cornerstone Insurance with N12.6 billion. Custodian Investment which comprises Custodian & Allied and Custodian Life both have shareholders’ funds of N19.1 billion; while Wapic Insurance and Wapic Life both have shareholders’ funds of N17.2 billion.
Meanwhile, companies that are far behind are Lasaco Assurance with 8.9 billion while Mutual Benefits with its life arm both have N11.9 billion. For companies in the general business segment where they have been mandated to raise their capital to N10 billion from N3 billion, Nem Insurance has crossed the threshold with shareholders’ funds of N13.9 billion.
However, some companies that still have some work to do are Sovereign Trust with shareholders’ funds of N6.3 billion; Consolidated Hallmark with N6.3 billion; as well as Regency Alliance with N5.4 billion. On the life business segment where companies are to raise their capital to N8 billion from N2 billion, FBN Life has crossed the threshold with N10.7 billion, as well as Prudential Zenith Life with N8.5 billion.
Companies that still have some work to do in terms of seeking additional capital are African Alliance with N6.0 billion, Arm Life with N5.6 billion. Meanwhile, while so many companies still have a long way to go.
Investigations reveal that approaching the capital market to raise funds has been ruled out by the companies due to the current bearish investor sentiment. While companies like Sovereign Trust and Consolidated Hallmark have recently done rights issues to beef up their capital levels but still have wide margins to fill, foreign investors have bought into some others like Royal Exchange, although they still need fund to meet up with the threshold.
However, for so many others, their recapitalization plans still remain unknown. For some companies that still have to meet up with additional capital, some experts are of the view that it would be challenging to seek fund through the capital market given the unattractiveness of the insurance sector to investors.
An insurance chief executive officer, who spoke on condition of anonymity, said that 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.
