The Nigerian Stock Exchange (NSE) has placed UNIC Insurance Plc on full suspension, following approval of the scheme of arrangement that will lead to a restructuring of the insurance company under an investment holding company.
Full suspension disallows both trading and price movement on a particular stock unlike technical suspension which allows trading without price movement.
The NSE stated that the full suspension was in compliance with the process required for the approved scheme of arrangement between UNIC Insurance and shareholders of the insurance company.
Already, the NSE has approved the rearrangement of UNIC Insurance under a new core investor and shareholding structure. The restructuring will allow the ailing insurance company to access capital through a new core investor.
The scheme of arrangement included the plan by South Africa’s Liberty Holdings to acquire 75 per cent majority equity stake in Unic Insurance Plc for 160 million Rands, about $12 million and an equivalent of N3.72 billion. Liberty Holdings is an investment holding company and it already has investment in the Nigerian market through Total Health Trust.
Chief executive officer, Liberty Holdings, Thabo Dloti recently outlined the group’s plan to expand into East and West Africa regions as part its strategy to grow its presence in West Africa through long-term insurance business and asset management business.
“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,” Dloti said.
With more than five decades of operations, UNIC Insurance has struggled with declining performance in recent years. Like most insurance stocks, it has stagnated at its nominal price of 50 kobo at the NSE.
Many analysts saw the merger and acquisition deal between UNIC Insurance and Liberty Holdings as a possible boost for the two companies.
Although relatively low turnover-to-net assets ratios of most insurance companies may on one hand imply underutilization of shareholders’ resources, these also indicate significant headroom for underwriting capacity and growth on the other hand.
Most analysts believe there is still much growth potential in the Nigerian insurance industry. From government to the National Insurance Commission (NAICOM) and to operators, insurance stakeholders have recently taken major steps to enliven the performance of the industry. The passage of the Nigeria Content Development Act and other laws on compulsory insurance by government has opened up tremendous business opportunities for insurance companies. The Local Content Act requires that all insurance risks associated with oil and gas sector including prospecting, exploration, drilling, constructions, shipping, distribution, marketing and transportation must be insured in Nigeria with registered Nigerian insurance company. This law alone represents immense opportunity for well-capitalised and stable insurance companies.
Besides, NAICOM has also in recent period taken many far-reaching and proactive steps to standardize insurance operations and enforce conformity with best practices. NAICOM has introduced new accounting standards with more stringent provisions to ensure that insurance profit and loss accounts and balance sheet showed the true state of affairs. Insurers are also expected to make timely rendition of accounts, making their returns more predictable. With the broad provisions of the Insurance Act and related NAICOM guidelines, the tough stand of the insurance regulator has greatly improved the operating environment. The industry regulator is also leading the charge for compliance with existing compulsory insurance laws.
Although still a highly fragmented industry with some 51 insurance companies, well-managed quoted risk companies stand to benefit both in the event of industry consolidation or market-driven competitiveness that places premium on security of insurance rather than lower rates. With estimated penetration of some seven per cent, Nigeria’s large population and expansive economy also put insurers on good footings.