The management of Guinea Insurance is set to increase the share capital from N4 billion to N12 billion as it seeks approval of the shareholders.
The company made this disclosure in a notification to the Nigerian Stock Exchange (NSE), where it announced its forthcoming Annual General Meeting (AGM), scheduled to hold on Wednesday, November 20, 2019.
In a statement that outlines the AGM’s agenda, it said, “the Directors be and are hereby authorized to raise, whether by way of Public offer, private placements, rights issue, book building process or other methods, additional capital of up to 12,000,000,000 (Twelve Billion Naira) by way of Issuance of shares, convertible or non-convertible loans, stocks, medium-term notes, corporate bonds or other securities in such tranches.
Guinea Insurance Plc may use the raised capital to acquire assets, make a take-over, repay debts or save itself from bankruptcy. Although a company can raise capital in other ways, such as borrowing from banks or issuing bonds, there can be times when the companies may be reluctant to seek credits from banks because of the high-interest rate incurred by loans.
The agenda read, “That the authorized share capital of the company be and is hereby increased from N4,000,000,000 to N12,000,000,000 by the addition of the sum of N8,000,000,000 divided into N16,000,000,000 ordinary shares of 50Kobo each ranking in all respect pari-pasu with the existing shares of the Company.”
Nairametrics understands that Guinea Insurance’s decision to raise capital might have been reached in view of the recent increase in capital requirements by the National Insurance Commission (NAICOM).
Recall that not too long ago, NAICOM introduced the tier-based minimum solvency capital, a situation that was later cancelled after it was challenged in court.
Specifically, the capital requirements for life insurance firms were increased from N2 billion to N8 billion. Insurance firms underwriting general business have been mandated to shore up their capital from N3 billion to N10 billion.
Composite insurance firms, that is, firms underwriting both life and general business will raise their capital from the current N5 billion level to N18 billion. Reinsurance firms will move up from the current minimum capital of N10 billion to N20 billion.