AIICO Insurance Plc yesterday hit a year high of N0.99 per share. The stock was one of the best performing on the NSE last week and has continued what seems to be a bull run. It gained 9% on Friday, 9.76% on Monday and closed Tuesday’s trading session at N0.99, up 10%.
Year to date, the stock is up 83% and is the second best-performing insurance stock on the Nigerian Stock Exchange (NSE).
What’s driving the price up?
The stock has been on an upward swing since news broke during Friday’s trading session, that the company intends raising N5.28 billion through a private placement, subject to shareholders approval. This translates to a premium of 20% above current prices.
Insurance companies have embarked on a fundraising drive as the National Insurance Commission (NAICOM) has introduced tier-based capital base for firms in the country. Each cadre of insurance has been divided into three tiers.
Any room for further upside?
While the stock could go even higher, some correction is bound to take place as investors take profit.
After the exercise, however, the stock could witness a decline, as its earnings per share would decline sharply. The new shares that would be issued would push the company’s shares outstanding from 6.9 billion to 11.3 billion.
Who’s the investor?
AIICO is yet to give any further information on the parties interested in taking up the private placement. The company’s full-year 2017 results show that AIICO Bahamas and DF Holdings held 12.83% and 18.62% respectively.
DF Holdings is controlled by billionaire and the company’s immediate past Chairman, Dele Fajemirokun.
About the company
AIICO commenced operations in Nigeria in 1963 as an Agency office of American Life Insurance Company (“ALICO”) – at the time, a subsidiary of American International Group (“AIG”).
The Company was incorporated, registered and licensed in Nigeria as American Life Insurance Company Limited – as a wholly owned subsidiary of ALICO/AIG in 1970 to offer Life and Pension products and insurance services.
It was renamed American International Insurance Company Limited (“AIICO”) upon the acquisition of a 60% stake by the Federal Government of Nigeria and later listed on the Nigerian Stock Exchange in 1990, after which both shareholders – the Federal Government of Nigeria and AIG divested.
Results for the half year ended June 2018 show gross premium increased from N14.8 billion in 2017 to N19.2 billion in 2018. Profit before tax jumped from N1.1 billion in 2017 to N2.1 billion in 2018. Profit after tax also jumped from N988 million in 2017 to N1.9 billion in 2018.