As insurers get ahead with their recapitalization plans, Investment Banks and Financial Advisers are hustling around the companies to arrange merger and acquisition deals as well as private and public placements to raise funds.
Investment advisers give advice to clients about investing in securities such as stocks, bonds, mutual funds, or exchange traded funds, and can help client’s package deals to help them raise funds for expansion and growth.
Yesterday, Tuesday 17th September 2019, a lot of insurers received approval or otherwise to their recapitalization action plans submitted to the National Insurance Commission (NAICOM).
NAICOM had fixed 17th September 2019 as last day to complete review of recapitalization plans submitted by insurance companies and give direction for effective actions on how to comply with the minimum paid-up requirement.
An industry CEO had told Business Day that “We are not foreclosing a merger deal, as long as we can find those who share the same vision with us.”
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According to the CEO, merger is not a bad option for us, but it has to be right in such a way that it creates shareholder value.
Sunday Thomas, acting commissioner for Insurance/CEO, NAICOM had noted during a seminar for Insurance Director’s in Lagos that the Commission has received reasonable number of companies recapitalization action plans, but however noted that some did not understand the guideline.
Thomas said “we shall review the plans and guide them, and where we need to meet such companies’ directors we will, he said.
Guy Czartoryski, head of Research, Coronation Research, an arm of Coronation Merchant Bank said he expects to see mergers and acquisition in the course of the insurance industry recapitalization.
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“the potential impact of the May 2019 circular on the Composite Insurers could be drastic. We might see eight companies either seeking to merge or raise a considerable level of fresh capital.”
NAICOM had in a circular dated July 23rd, 2019, sent to the all insurance and reinsurance firms titled: “Re: Minimum Paid Up Share Capital Policy for Insurance and Reinsurance Companies,” signed by Pius Agboola, director, Policy & Regulation Directorate, NAICOM stated that the recapitalisation plan should include among others, capital status of the companies as at the last audited financial statements; board resolution on how to comply with the directives, and detailed action plan on how the funds for the recapitalisation are to be sourced with timeline and deliverables.
The circular also directed that companies intending to seek funds from the capital market were required to submit their plan of action on a file-and-use basis, just as, “companies that intend to merge or acquire another should submit their proposal after which they must comply with Section 30 and 31 of the Insurance Act 2003.”
The commission noted that after the submission is made, it “shall review and provide response on the submitted plans on or before September 17, 2019,” adding that the review may require meeting the board and management of each of the insurance companies on its recapitalisation plan.
The Nigerian insurance regulator, NAICOM had in a circular issued on Monday May 20, 2019 announced increase in the paid-up share capital of life companies from N2 billion to N8 billion; General Business from N3 billion to N10 billion; Composite Business from N5 billion to N18 billion; and Reinsurance companies from N10 billion, to N20 billion.
According to the Commission, the minimum paid-up share capital requirement shall take effect from the commencement date of this circular (May 20, 2019) for new applications, while existing insurance and reinsurance companies shall be required to fully comply not later than 30th June 2020.
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