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Tuesday, November 21, 2017.

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Nigerian News » Finance

Recapitalisation: 12 Insurance Firms In Merger, Acquisition Talks

Ahead of the capital verification exercise expected to commence in the next few months in readiness for the Risk Based Supervision (RBS) that will lead the insurance sector to recapitalisation this year, about 12 out of the 58 insurance companies in the country have already commenced recapitalisation process through mergers and acquisitions, LEADERSHIP can exclusively reveal.

Some of them, investigation reveals, are currently in acquisition talks with  foreign investors to acquire substantial stake in their firms, even as some underwriters have concluded acquisition plan with their respective investors.

The capital verification exercise, to be conducted by the National Insurance Commission (NAICOM), is to ensure that underwriting firms are adequately capitalized to meet their business obligations, following information that some underwriters have eaten deep into their shareholders’ fund, thus leaving  them undercapitalised.

The erring firms, according to findings, would be mandated to shore up their capitalisation or risk losing their operating licenses.

While some underwriting companies, who have started the recapitalisation negotiation process since last year, have concluded talks with their investors, mostly foreign investors, some are still at the discussion stage with their buyers, even as few listed insurers are eyeing the nation’s capital market to raise funds.

The planned recapitalisation exercise, which would be done through RBS, will categorise underwriting firms into tiers, while the level of capitalisation determines the risk businesses to underwrite.

The new capital base, it was learnt, would be adequately spelt out in the Risk Based Supervision (RBS) framework, that would be made public in the second quarter of 2017.

A couple of weeks ago, Standard Alliance Insurance Plc announced that it has formally merged with its sister company, Standard Life Assurance, to become one big insurance company, underwriting life and non-life insurance businesses.

South Africa’s Liberty Holdings is also acquiring a 75 percent stake in UNIC Insurance Plc, a Nigerian insurer, for $12 million. According to Liberty Chief Executive, Thabo Dloti, “We see Nigeria as a market of the future. It may be having difficulties now, but everything indicates to us that in the long term, Nigeria is going to be a big contributor of growth if you are doing business in Sub-Saharan Africa.”

Royal Exchange Plc had already notified the Nigerian Stock Exchange (NSE) that it wants to raise about N2billion to N3billion through bond, hoping to conclude this listing before the end of this first quarter, in preparation for RBS in insurance industry.

Moreover, Allianz Global Corporate & Specialty (AGCS) Africa, said it is targeting investment opportunities in insurance sector of the country, but it’s taking its time to assess some insurance companies in a bid to acquire them. Although, it did not mention the insurers it intends to buy, insider source revealed that it is eyeing some of the struggling underwriters.

Chief executive officer, AGCS, Delphine Maidou, stated that the firm would have loved to acquire a new insurance licence, instead of acquiring an existing firm, she pointed out that AGCS is still assessing some insurance companies with a bid to acquire them in the near future.

“We want to be able to manage the company we buy. When we are coming into the market , we are coming with products that we will want to sell and in the past few years, it’s been difficult to get new licence, unless you buy into the existing ones. And most companies have several shareholders, which makes it difficult to buy, “ she stated.
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