Major shareholders of Lasaco Assurance Plc are to inject about N14 billion to increase the minimum paid-up share capital of the company to N18 billion, as mandated by the National Insurance Commission (NAICOM).
This was revealed by the Chief Executive Director of the underwriting firm, Segun Balogun.
NAICOM on May 20, last year mandated the 58 insurance companies and two reinsurance companies in the country to increase their paid up share capital.
The minimum paid-up share capital of a life insurance company was raised from N2 billion to N8 billion; non-Life insurance from N3 billion to N10 billion and composite insurance from N5 billion to N18 billion. Re-insurance companies were directed to raise their capital base from N10 billion to N20 billion.
The regulator had early this month shifted the deadline for the recapitalisation exercise from May 20, 2019 to December 31, this year.
Balogun, who spoke at the opening ceremony of a one-year sensitisation plan to mark the company’s 40 years’ existence in Lagos, said the company which has been operating as a composite company has been strong and stable despite economic challenges.
He stated that the company’s shares had been reconstructed following the approval by shareholders.
After this, he said the company increased its units of shares.
With this, the company now has 10 billion shares, which have been reduced to over N2 billion based on the reconstruction of the shares, he noted.
He also said they have got approval to increase the authorised share capital from 10 billion units to 20 billion units.
He pointed out that the issue or challenge is not increasing the authorised share capital to accommodate the increase they desire but where the money would come from.
He, however, said they engaged top 10 shareholders of the company who holds 60 per cent of the shareholding on the plan.
He said: “Recall that NAICOM came up with paid up capital, which is higher than what the tier base capital proposal type required. For us at LASACO, the first thing we did out of our recapitalisation plan was that we reconstructed our shares. We have over seven billion units of shares that have been sold to over 37,000 Nigerians at 50 kobo. So, to achieve the reconstruction plan, we reconstruct the shares to the extent that the number of shares that have been issued becomes less. So, instead of over 7 billion units of shares that has been issued, we had one third, which is two billion plus.
“However, we still have almost eight billion units of shares unissued. In addition to reconstructing the shares, what it also means is that if you have one unit of shares of LASACO, instead of the one unit being valued at 30 kobo or 40 kobo, it means one unit of shares of Lasaco is now that amount multiplied by three. At the par value, 50kobo multiplied by three is N1.50kobo for one unit of shares. At the price of 30 kobo, which Lasaco shares is trading, the value of share of Lasaco is now 90 kobo. What this means for investors is that instead of you getting dividend three kobo like we paid in 2017 or four kobo like we paid in 2018, it then means that what you will be paid will be more significant.
“Instead of paying 3 kobo, it will be 9 kobo, instead of 4 kobo, it will be 12 kobo and this will be more meaningful. Even at three kobo that was paid, if you look at all the quoted companies in Nigeria, you don’t have many companies paying as much as 10 percent of the value of shares as dividend. If the value of your share is 30 kobo and you pay three kobo, that is 10 per cent. If the value of your share is 40 kobo and you pay four kobo, that is 12.5 percent. The big companies of Nigeria that their shares are priced at N30, N40, N120 or N150, the dividend they pay over the value of your share is usually not as high as 10 per cent or 12.5 percent. Yes, you can say, this payment is in kobo, in terms of the ratio of the dividend we are paying over your stock, it is more meaningful. You are getting better returns on your investments than the bigger ones.”
He further disclosed that after the reconstruction, they decided to increase the number of units of shares of the company.
He added: “We have 10 billion shares which the issue will reduce to over N2 billion. We also said we should increase the authorised share capital from 10 billion units to 20 billion units. On Wednesday, we received a letter from the Corporate Affairs Commission saying that our authorised share capital has been increased from 10 billion units to 20 billion units. What this means is that we have almost 18 billion units of shares to issue. The issue or challenge is not increasing the authorised share capital to accommodate the increase we want to do. The issue is: Where will the money come from? So, what we have done as a company as we have 37,000 shareholders. The top 50 shareholders control about 70 percent of the shareholding and we have the top 10 controlling almost 60 percent. What we have done is to engage these top 10 shareholders on the plan. As it is, we are going to offer rights issue and do private placement because there are individuals and companies that have shown interest to buy into Lasaco.’’