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AIICO Insurance Plc, in a notice to the Nigerian Stock Exchange (NSE), has announced it will be holding an Extra Ordinary General Meeting on Friday the 5th of October 2018. Agenda of the meeting is to consider and if thought fit pass the following resolutions.

  • The directors are authorized subject to the approval of relevant authorities to raise 4.4 billion ordinary shares of N0.50 each at N1.20 per share by way of a special/private placement. Shareholders had in May 2016, given the directors approval to raise additional capital up to N25 billion.
  •  The proposed shares to be issued shall rank parri passu with the ordinary shares held by existing members of the public.
  • The directors are authorized to take all actions deemed necessary and expedient without further recourse to shareholders

AIICO Insurance Plc is currently trading at N0.82 in today’s trading session, up 5.33%.

The National Insurance Commission (NAICOM), the regulatory body for insurance firms in the country, last month released the new capitalization requirements for insurance firms in the country.

Under the risk based capitalisation requirements, each cadre namely life, non life and composite insurance firms have had their capital base divided into three tiers.

Insurance companies operating in the composite segment, that is all classes of insurance now have three tiers. Companies operating in tier one will be required to have a capital base of N15 billion. Tier two firms will need to have a capital base of N7.5 billion, while those in tier 3 will maintain the current capital base of N5 billion.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com


  1. I am going to do a full analysis of this later but I believe the directors of AIICO have been manipulating the financials of AIICO to suppress the share price in the last three years in preparation for this private placement. Suffice to ask questions like how did they determine the share price? Why not name the investors that are offered the shares or at least specify the selection criteria? Why not do a rights issue?

    • Here is the complaint I filed with the SEC this afternoon. I sent a copy to the contact email of AIICO and posted same to the Complaint section of NAICOM

      Accounting Irregularities At AIICO Insurance PLC

      On August 31 2018, AIICO notified the SEC of its Notice of Extra Ordinary General Meeting for the purpose of seeking approval for the Private Placement of 4.4 Billion Ordinary shares at =N=1.20 per share to unnamed investors. I do believe that this Private Placement is a breach of the fiduciary duties of the AIICO’s directors to the retail shareholders of AIICO. This is because I believe that AIICO’s management have been manipulating the Financial Reports of AIICO in the past 2 years with the sole purpose of suppressing the share price of the AIICO stock so that this Private Placement of shares can be made at a price much lower than what the intrinsic value of the company would have dictated if the Financial Statements for those 3 years were presented in a true and fair manner.

      In the 2016 FYE, aiico marked down the value of its FGN Bond holding by about
      N12 billions because they claimed interest rates increased and the face value of the FGN bonds has to be discounted. This N12 billion was included in the negative balance on the ‘Available-For-Sale Reserve’ line of the equity section of the balance sheet thereby reducing shareholders funds and understating Financial Assets by the same amount. They disclosed the list of FGN holdings and over 90% of them by value were at about 12.15%. I can only guess that they used a prevailing 16% or thereabout interest rates for discounting because the list of most recent FGN bonds in the 2017 Financial statement was at 16%. This was fair enough as in that same year, the value of liabilities for life insurance and annuities were marked down by about =N=5.6 billion for the same reason, haven valued same at 10% in the 2015 FYE.

      However, in the 2017 financial statement, the value of of liabilities for life insurance and annuities were now marked up by about N11 billion naira depressing the profit before tax for that year by the same amount. According to the Chairman’s statement on page 15 of the Financial Statements , this was because interest rates reduced by 12.9%. I believe this was a mistake in that he meant interest rates reduced to 12.9 percent which is used to measure the liabilities for life and annuity contracts. You will expect the same 12.9% to be used to measure the carrying values of the FGN bonds which should largely reverse the N12 billion negative AFS reserves and show that the FGN bonds are being carried mostly at cost. Alas, the N12 billion negative equities are still included in the negative balance on the ‘Available-For-Sale Reserve’ line of the equity section of the balance sheet . As I said earlier, as at 31-DEC-2017, about 80% by value of the FGN Bond holdings of aiico were at 12.15% while the rest were at greater than 16%. At prevailing interest rates of 12.9% according to the Chairman’s statements, these bonds should mostly be carried at cost at least because the positive margin of about 3% on the 20% of bonds carried at 16% should be enough to offset the negative margin of 0.75% on the majority of the bonds. Therefore, instead of the value of N71.5 billion at which the Available for Available for sale assets are carried in the books, it should have been at about N83.5 billion while the ‘Available-For-Sale Reserve’ line should not have included the negative value of N12 billion . Consequently, shareholders funds should have been at about N22.5 billion or about N3.25 per share instead of the N10.5 billion or N1.58 per share shown in the books.

      The manipulations continues in the H1 2018. First, about N10 billions of the AFS negative reserve have been charged against the Retained Earnings leaving only N2 billion, making the undervaluation of FGN Bond holdings less transparent. Secondly, there is a jump of N6.7 billions in Insurance Contract Liabilities. There are two issues I see with this. First, has interest rates gone down so much within the first 6 months of 2018 to warrant such a significant mark up in liabilities? If so, why don’t we see the same impact on the values of the matching assets? Secondly, when you see this markup on the Insurance Contract Liabilities, it is usually against the Gross Premium Written, creating a negative gap between the Gross Premium Written and Gross Premium Income. However, the negative gap between the Gross Premium Written and Gross Premium Income in this statement is only N2.3 billions. I do see an increase of N4.9 billion in claims expenses between H1 2017 and 2018 suggesting that the increase in the Insurance Contract Liabilities was made against the Claims Expenses line.

      The sole purpose of this private placement is for the management of aiico to increase their proportional holding in the company at the expense of retail shareholders. This is a very highly capitalized company with super liquidity. As at 31-DEC-2017, the company has about N83.5 billion FGN bonds if you correct for the undervaluation and N5 billion of Cash and Cash Equivalents to service N70 billions of Insurance and Investments contract liabilities. The H1 2018 statement suggests that the capital and liquidity position improved further. aiico does not need the proceeds of this private placement.


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