The proposed divestment from pension business will further support AIICO Insurance Nigeria Plc capital position amid the ongoing recapitalization exercise in the industry.
According to a statement of the website of the Nigerian Stock Exchange (NSE), First City Monument Bank Plc or FCMB Group plans to acquire the 70 percent stake held by AIICO Insurance and the 26 percent held by some other shareholders in AIICO Pensions.
If the business combination is consummated by the end of 2020, AIICO Insurance will be in a better capital position as a result of the liquidity injection.
The insurer recently sought the approval of the NSE to raise N3.50 billion in rights issue to help underpin capital position.
Insurers have been divesting business segment in a scheme of reorganization to better position them to overcome a low yield environment and stringent regulatory environment.
In February 2020, AXA Mansard disclosed plans to divest its pension fund management and real estate businesses.
Insurers in Africa’s largest economy have been scampering around over the past few months to raise money so as to meet the new minimum capital requirement of regulators.
The regulator has said any company that fails to meet the new standard shall have its license revoked.
AIICO Insurance’s shareholders’ fund spiked by 83.84 percent to N28.03 billion as at December 2019, which represents 83.3 percent increase from N15.27 billion recorded as at December 2018.
The Insurer generated a higher return on sales, which means it has turned each Naira invested in premium into higher earnings as net profit margin increased to 13.39 percent in December 2019 as against 9.82 percent the previous year.
The company attributes the stellar performance and its ability to deliver a high return to shareholders to growth across all lines of business within the group even amid challenging business environment.
The revised guidelines by the regulator requires Life insurance providers to have minimum capital of N4bn (existing minimum – N2bn) by 31 December 2020 and paid up capital of N8bn by 30 September 2021.
General insurers are required to meet a minimum paid-up capital of N5bn (existing minimum – N3bn) and N10bn by 31 December 2020 and 30 September 2021 respectively.
Composite insurers are expected to have a minimum of N9bn in paid up capital (existing minimum – N5bn) by 31 December 2020 and N18bn by 30 September 2021, while reinsurers should have N12bn (existing minimum – N10bn) in minimum paid up capital by 31 December 2020 and N20bn by 30 September 2021.