Management of Guinea Insurance Plc and African Alliance may presently be at their wit’s end as both companies are operating below minimum statutory requirements. NAICOM guidelines for an insurance firm operating in the non life space require it to have a minimum capital base of N3 billion.
Guinea Insurance capital base is currently N2.9 billion. Even more shocking is that the company is trading at a net asset per share of 46 kobo which means the shares are overvalued despite trading at a nominal value of 50 kobo. African Alliance Plc on the other hand has a N2.61 billion shortfall in its solvency ratio. This means the company has more liabilities than assets.
What the companies are doing about this
Guinea insurance has approved a capital raise of N1 billion to address the shortfall. The company did not however state when it intends doing so, or if it is in discussions with a strategic investor. The company’s low share price and several more attractive issues presently in the market, mean a public offer may not be on the cards. To meet its solvency requirements, African Alliance has signaled its intention to sell non-performing assets. The proposed assets to be sold are not stated.
What happens if the companies fail to meet requirements?
If both firms are unable to meet operational requirements, NAICOM may be forced to dissolve their boards and appoint an interim management. The regulator had in 2012 taken over Goldlink Insurance Plc and International Energy Insurance in 2015. One wonders why the regulator has allowed both companies to decline to such a dire state without intervening.
