Universal Insurance mulls new capital raising to boost capital base

Taofik Salako

Universal Insurance Plc is considering raising new equity funds to bolster its operations and strengthen its capital base ahead of deadline for new capital requirements for the insurance sector.

The board of the insurance company is expected to meet shareholders next week to seek approval for a new capital raising exercise.

At the annual general meeting scheduled for Lagos, the board is expected to table two resolutions before shareholders to facilitate the new fund raising.

Shareholders are expected to authorise the board to raise additional equity capital up to the maximum limit of the company’s authorised share capital. The fund raising may be by any means of issuance including by special placement and rights issue as may be determined by the board.

To provide headroom for absorption of oversubscription, the board is also requesting shareholders to authorise it to capitalise excess money and allot additional shares to the extent that can be accommodated by the company’s unissued share capital.

Insurance companies are in a frenzy for additional capital to meet new capital requirements stipulated by the National Insurance Commission (NAICOM).

NAICOM had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level. The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion. Insurance companies are required to comply fully with the new minimum capital base by June 30, 2020.

Key extracts of the audited report and accounts of Universal Insurance for the year ended December 31, 2018 showed that gross premium rose from N753.07 million in 2017 to N1.69 billion in 2018. The company posted a pre-tax loss of N39.55 million in 2018 as against pre-tax profit of N666.21 million in 2019. Net loss after tax stood at N46.567 million in 2018 as against net profit of N634.18 million in 2018. Loss per share thus stood at 0.29 kobo in 2018 compared with earnings per share of 3.96 kobo in 2017.

Also, interim report and accounts of the insurance company for the first quarter ended March 31, 2019 showed that gross premium doubled from N346.47 million in first quarter 2018 to N650.91 million in first quarter 2019. Profit before tax dropped from N131.95 million to N61.44 million. Profit after tax also dipped from N118.1 million to N47 million. Earnings per share declined from 0.74 kobo in first quarter 2018 to 0.29 kobo in first quarter 2019.

The management of Universal Insurance had recently announced a partnership with the Nigerian Union of Road Transport Workers (NURTW) as the official underwriter of the union’s Passengers Manifest Scheme (PAMS).

PAMS is designed to ensure that passengers travelling by road across the country have their names authenticated on the union’s digital manifest and are covered with genuine insurance policy.

Universal Insurance stated that the partnership will go a long way in improving insurance awareness and penetration in Nigeria while boosting public confidence in the insurance industry through prompt settlement of claims.