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Business News

Unable to cope with new capital base, insurance firms consider merger/acquisition

Some stakeholders in the Nigerian insurance sector have expressed their willingness to consider mergers and acquisitions in light of the new capital base for the sector which was recently introduced by the National Insurance Commission (NAICOM).

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NAICOM, Royal Exchange Plc, InsuResilience Investment Fund, REGIC

Some stakeholders in the Nigerian insurance sector have expressed their willingness to consider mergers and acquisitions in light of the new capital base for the sector which was recently introduced by the National Insurance Commission (NAICOM).

Following NAICOM’s pronouncement on the issue, the stakeholders were said to have held a series of meetings in an effort to figure out how to cope with the challenges posed by the new capital requirement.

Note that NAICOM has fixed June 30th, 2020 as the deadline for the compliance with the new capital base.

Shareholder’s Stance: In the course of their meetings, stakeholders in the insurance sector looked at ways they can multiply their capital base within one year. They also considered merger and acquisition as the potential solution to the problem. More so, they agreed to seek for a possible extension of the deadline that had been given by their regulator, NAICOM.

Stakeholders’ Complaint: According to some stakeholders who chose not to be named, the new capital base has presented a huge challenge for insurance. According to the source, adherence to the new requirement is a lot more stringent to compared to the tier-based recapitalisation which was suspended last year.

“We have to just find a way to meet the requirement whether by acquisition or merger.  It is better for a company to be acquired or merge with another and have maybe, one or two seats on the board than to be liquidated.

“This recapitalisation is different from the tier based because any company that does not recapitalise after the one year given will go down.”

Despite the challenge, some other stakeholders have expressed optimism that insurance companies will soon conclude on how to resolve the matter with their board and management.

Another source who also preferred anonymity, however, noted that it might be very challenging for the companies to get the capital they needed from the capital market. According to him, merger and acquisition might be the only way out.

“But merger and acquisition also come with their own problems too, as the parties involved may not totally disclose all their liabilities.” 

The Backstory: Recall that the National Insurance Commission (NAICOM), recently increased the minimum paid-up share capital of insurance and reinsurance firms, a move which sent shock waves across the country’s insurance sector.

Life insurance firms’ capital base was raised from N2 billion to N8 billion, while general companies got a raise from N3 billion to N10 billion. Meanwhile, composite insurance companies’ capital was raised from N5 billion to N18 billion while the capital base for reinsurance companies was also increased from N10 billion to N20 billion.

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Famuyiwa Damilare is a trained journalist. He holds a Higher National Diploma (HND) in Mass Communication at the prestigious Nigerian Institute of Journalism (NIJ).Damilare is an innovative and transformational leader with broad-based expertise in journalism and media practice at large. He has explored his proven ability in the areas of reporting, curating and generating contents, creatively establishing social media engagements, and mobile editing of videos. It is safe to say he’s a multimedia journalist.

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    Business News

    Heavy sell-off in Guinness shares leads to N6.9 billion market value loss in a single day

    Shares of Guinness Nigeria Plc suffered a 9.89% loss today.

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    Guinness Nigeria Plc Reports Full Year F19 Results

    Guinness Nigeria Plc suffered a 9.89% loss today following a heavy sell-off in the shares of the brewer. This triggered a market value loss amounting to about N6.9 billion at the close of trading activities on the Nigerian Stock Exchange, as investors scaled-down stakes in the brewer.

    Data tracked at the close of the market today revealed that the shares of GUINNESS declined from N31.85 per share at the market open, to N28.70 per share at the close of the market today, to print a loss of 9.89%.

    This decline saw the market capitalization of the leading maker of beer and spirits fall from N69.75 billion to N62.86 billion at the close of trading activities today, putting the total market value loss at N6.89 billion.

    The shares of Guinness at the close of the market today cleared at N28.70 per share, 9.89% lower than the closing price of N31.85 per share yesterday.

    At the current price, Guinness shares are currently trading 20.27% lower than their 52-week high of N36.00 per share. However, the shares of the company have returned about 120.8% gains for investors who bought them at their 52-week low trading price of N13.00 per share last week.

    During trading hours on the Exchange today, about 159,380 ordinary shares of Guinness Nigeria Plc worth about N4.57 million, were exchanged in 27 executed deals.

    The shares of Nigerian Breweries Plc and Golden Guinea Breweries Plc closed flat at N50.1 per share and N0.81 per share respectively, while the shares of International Breweries Plc shed 0.88% to close low today at N5.65 per share.

    What you should know

    • At the close of trading activities today, the NSE All-Share Index and market capitalization appreciated by 0.29% to close higher at 39,128.34 index points and N20.477 trillion respectively.
    • The NSE Consumer Goods Index, an investable benchmark designed to track the performance of the shares of consumer goods companies like Guinness Nigeria Plc, depreciated by -0.35% to close the day lower at 553.26 index points.

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    Business News

    NAICOM revokes operational licence of UNIC Insurance, appoints Receiver/Liquidator

    NAICOM stated that it had appointed Hadiza Baba Gimba as the Receiver/Liquidator to wind up the affairs of the company.

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    Recapitalisation: 26 firms get NAICOM's approval

    The National Insurance Commission (NAICOM) on Wednesday announced the withdrawal of the operational licence issued to UNIC Insurance Plc.

    Although no official reason has been provided for the revocation of the insurance firm’s operating license, NAICOM, however, stated that the decision of the regulator was in the exercise of the powers conferred on it by the enabling laws.

    According to a report from the News Agency of Nigeria (NAN), this disclosure is contained in a notice which was issued by the commission in Lagos to the general public and policyholders, where it noted that the revocation of the operational license, RIC 043, is with effect from March 25.

    NAICOM, thereafter stated that it had appointed Hadiza Baba Gimba as the Receiver/Liquidator to wind up the affairs of the company.

    NAICOM in its statement said, “The general public/policyholders are by this notice required to direct all inquiries and correspondence regarding UNIC Insurance to the receiver/liquidator.

    The receiver/liquidator will be dealing with the company’s liabilities in accordance with the provision of Insurance Act 2003.’’

    What you should know

    • It can be recalled that NAICOM, for the third time in June 2020, gave insurance firms in the country a one-year extension to meet the recapitalisation obligation that was recently set for them apparently due to the coronavirus pandemic which had disrupted the activities of most insurance companies.
    • Some insurance companies had been going through some bad patches with a good number of them struggling to meet up with their obligations and the recapitalization requirements.
    • The recapitalisation programme requires life insurance firms to meet a minimum paid-up capital of N8.0 billion, up from N2.0 billion previously. In the same vein, general insurance companies are required to raise their minimum paid-up capital to N10.0 billion from N3.0 billion previously.
    • The regulatory capital for composite insurance was raised to N18.0 billion from N5.0 billion previously while reinsurance businesses are now required to have a minimum capital of N20.0 billion from a previous N10.0 billion.

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