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Financial Services

AIICO Insurance Plc shareholders approve increase of authorized capital to N20 billion

AIICO insurance Plc shareholders have given their nod to a rise in the firm’s authorized capital to N20 billion.

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FCMB Pensions, AIICO Insurance Plc to Offer Right Issue Of ordinary shares worth N3.5 billion, DF Holdings, DF Holdings acquires additional 27.17 million units of AIICO shares worth N30 million.

The Shareholders of AIICO insurance Plc have approved a request by the management to increase its authorized share capital from N18 billion to N20 billion, through the creation of additional 4 billion ordinary shares of 50 kobo each.

This is according to a press release issued by the Head, Strategic Marketing and Communications of the firm, Segun Olalandun, and seen by Nairametrics.

READ: There is a scramble for Sovereign Trust Insurance shares and its driving their share price up

The approval by the shareholders was obtained during the recently concluded 50th Annual General Meeting of the firm, held yesterday, December 8, 2020.

  • In the same vein, the shareholders also approved the declaration of  1 bonus share for every eight (8) ordinary shares held by existing shareholders of the Company as at December 28, 2020, payable from retained earnings .
  • Also, 1 bonus share for every five (5) ordinary shares held by existing shareholders of the Company as at December 28, 2020 payable from share premium.

READ: Federal High Court directs meeting to consider the transfer of GTBank into a Holding Company

What they are saying

Commenting on the recent development during the meeting, the Managing Director and Chief Executive Officer, Mr. Babatunde Fajemirokun, shed some light on the satisfactory progress the Company has made in its recapitalization journey, having surpassed the December 2020 expectations of the Regulator.

  • “There are no doubts that we have made some giant strides along this path. Beyond just meeting the requirements, we have seen the potentials and value this exercise brings and have positioned ourselves to take full advantage for value creation, both in the short and long term. AIICO will emerge stronger and with greater capacity to underwrite more risks.”

READ: How new CAMA 2020 will enhance SMEs’ ease of doing business

Why it matters

Despite surpassing the December 2020 deadline recapitalization target (phase I), this recent action will help strengthen the financial potentials of the firm and help to strategically position it to maximize future opportunities, creating enough stock buffers in the company’s treasury with a potential likelihood of increased paid-up capital in the future.

What you should know

  • NAICOM had earlier issued a circular on December 30, 2019, referenced NAICOM/DPR/CIR/25-03/2019, which extended the deadline for the recapitalization of insurance firms to December 31, 2020.
  • Due to the impact of the COVID-19 pandemic and its effect on business and households, NAICOM on June 3, 2020, via a circular referenced NAICOM/DPR/CIR/25-Q4/2020, further extended and segmented the recapitalization process into two phases and deadline of December 31, 2020 (50% of the minimum paid up for insurance and 60% for reinsurance) and a final deadline of September 31, 2020.
  • AIICO Insurance is a leading composite insurer in Nigeria founded in 1963 with a special business focus on Life and health insurance, General insurance, and Investment management services.
  •  According to Investopedia, Authorized share capital also known as Authorized stock is the maximum number of stock units (shares) that a company is legally allowed to issue or offer based on its corporate charter. An increase to the Authorized share capital is only possible through shareholder’s approval. In addition, companies often hold back a portion of their authorized share capital for future financing needs.

Chidi Emenike is a graduate of economics, a Young African Leadership Initiative Fellow and an Investment Foundations certificate holder. He worked as a graduate Teaching Assistant in the Federal College of Education Kano and is also a trained National Peer Group Educator on Financial Inclusion

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Financial Services

Ratings agency, Moody’s reveals it is reviewing First Bank’s ratings

Moody’s explained why it might downgrade First Bank’s ratings.

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Moody’s Ratings agency said on Thursday that it has put First Bank of Nigeria on review for a downgrade after the central bank sacked the board of directors and replaced them with new directors.

Moody’s made this statement in a report titled ‘Removal of Non-Executive Board Members Highlights Governance Shortcomings.’

In a quote, Moody’s said:

“Moody’s Investors Service, (“Moody’s”) has today placed all long-term ratings and assessments of First Bank of Nigeria Limited (First Bank) on review for downgrade. The review will focus primarily on an assessment of evolving governance considerations at First Bank, specifically corporate governance developments. The rating action follows the dissolution of First Bank’s board by the Central Bank of Nigeria (CBN), the bank’s primary regulator, on 29 April 2021. As a result of this action by the CBN, all the non-executive directors were removed while the executive management remained in place.”

The Governor of the Central Bank of Nigeria, Godwin Emefiele, had last week announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary, First Bank of Nigeria Ltd following the initial removal of its MD/CEO Dr Sola Adeduntan. Following his sacking of the board, he set up a new board for the bank holding company and its subsidiary and also reinstated Adeduntan as MD/CEO.

Moody’s mentioned that the regulatory actions demanded of First Bank by the CBN introduces a clould of uncertainty over the outlook of the bank. For example, the CBN had asked the bank to divest from its holdings in two listed companies while also recovering its loans from one of them.

“The review for possible downgrade reflects the rating agency’s view that the removal of all non-executive directors of the bank’s board by the regulator demonstrates corporate governance shortcomings and weaknesses in board oversight. The bank also needs to implement regulatory directives concerning the resolutions of loans to, and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.

Moody’s notes that the outcomes of these developments are uncertain at this point, and the final and long-term governance, reputational and financial implications of the events for First Bank are also unclear.”

The central bank directive sacking the board of the bank also retained its executive management perhaps suggesting that the CBN had confidence in the ability of the MD and his team to manage the bank. Moody’s also noted this in its briefing.

“While the bank’s executive management team remained the same, the rating agency believes these developments could distract management’s focus on implementing the bank’s strategic plan and road to recovery. First Bank management’s immediate key target was to reduce nonperforming loans (NPLs) to levels comparable with domestic peers. The rating agency recognises that, in the context of asset risks, the bank took steps to reduce its stock of problem loans, with its reported NPL ratio falling to 7.7% at year-end 2020 from 25.9% in 2018.”

Will Moody’s downgrade First Bank?

The rating agency explained that the decision to downgrade will depend on how strong the bank’s corporate governance structure is and whether the CBN will impose additional sanctions. If any of these crystallizes, it could downgrade its ratings.

“The bank’s long-term deposit ratings can be downgraded if flaws in the bank’s governance systems exist, and if the CBN imposes additional sanctions on the bank, including, but not limited to, conditions to address any vulnerabilities that may be discovered. Financial output that is less than anticipated could also result in a rating downgrade.”

Moody’s, however, poured water on any optimism around a rating upgrade.

Given the review for downgrade and the pessimistic outlook on the government of Nigeria, there is a slim chance that First Bank’s ratings will be upgraded. Stronger solvency progress than currently reflected in the ratings, combined with a stabilization of the sovereign outlook, could result in the outlook being stabilized.

Why is rating important?

Corporate Organizations desire positive ratings because of the effect it has on their ability to raise capital as well as the cost of capital. A high credit rating typically attracts positive investor sentiments helping organizations tap the debt and equity markets, especially from institutional investors.

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Business

Insurance companies paid N4 billion in claims after EndSARS protests – NIA

The NIA chief assured that some insurance operators were still working to settle genuine claims as most claims from insured businesses had been paid.

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The Nigerian Insurers Association (NIA) says Insurance companies paid N4 billion in claims to over 2000 businesses affected by the aftermath of the EndSARS protest after hoodlums took to the streets.

This was disclosed by Mr Ganiyu Musa, Chairman, NIA, on Thursday in Lagos.

The NIA chief assured that some Insurances operators were still working to settle genuine claims as most claims from insured businesses had been paid.

READ: Marginal oilfield: Bid winners allowed to make payments in naira – Minister

“The number of insured businesses that were affected at the last count was about 2,000 insured loss and the industry has settled N4 billion claims out of N4.5 billion in respect of the #EndSARS protests.

Once they are documented and completed, we have the commitment of our members that the claims will be paid timely,” he said.

He added that the association would continue ensuring members pay genuine claims to clients.

What you should know

Recall Speaker of the House of Representatives, Femi Gbajabiamila disclosed that Lagos State will need about N1 trillion for the reconstruction and repair of the properties and infrastructure that was vandalized and destroyed by hoodlums.

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