NIC applies for bonus issue to raise capital, improve liquidity

Mr Folayan Bayo, the managing director National Insurance Corporation.

What you need to know:

Reason. Insurance regulator has increased minimum requirements.


National Insurance Corporation, an Insurance and risk management services provider, has applied for regulatory approval to get a bonus issue as it moves to beat the October minimum paid-up capital requirements set by the Insurance Regulatory Authority (IRA).
A bonus issue refers to an offer of free additional shares to existing shareholders. Subject to the Capital Markets Authority (CMA) and Uganda Securities Exchange approvals, the firm intends to issue 819,661,942 new ordinary shares of Shs5 each instead of a cash dividend to recapitalise its earnings.

Increased capital
The insurer’s managing director Mr Folayan Bayo, in a media statement said if approved, the bonus issues will increase the company’s issued and fully paid up capital from Shs2.98 billion to Shs7.07 billion thereby strengthening the company’s capital base, improve liquidity of NIC shares at the USE and ensure the company’s continued compliance with regulatory requirements.
IRA increased insurance companies’ minimum paid-up capital requirements from Shs1 billion to Shs4 billion for non-life insurance, Shs3 billion for life, Shs75 million for brokerage firms and Shs10 billion in order to create a strong industry that is capable of insuring bigger risks.
IRA spokesperson Mariam Nalunkuuma said that most insurance companies have so far complied to the new requirements, with exception of only about four insurance companies and brokerage firms.
Mr Robert Baldwin, Crested Stocks and Securities chief executive officer and the sponsoring stockbroker for the Bonus Issue, said if approved, shareholders who were on the registry as of June 20, 2014 will be eligible to receive the bonus shares, thereby increasing their shareholding by 11 shares for every eight held.
CMA acting communications manager Charles Nsamba said: “We don’t comment on applications when the process is still ongoing to avoid any interference with the process.”
Mr Bayo noted that the new shares will only be issued in electronic format and deposited into Securities Central Depository (SCD) accounts.
Shareholders holding paper certificates were advised to visit their broker to open SCD accounts and immobilize their share certificates in order to receive the bonus shares.

Paid-up capital
Currently, insurers in Uganda are required to have paid-up capital of Shs1 billion, the lowest in the region.
In Kenya, life insurers are required to have minimal paid-up capital of KShs150 million (about Shs4.2 billion), while short-term underwriters must hold minimum paid-up capital of KShs300 million (Shs8.4 billion).


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