AIICO sells off 70% stake in pension subsidiary to FCMB 

Abeyanews can confirm that leading composite insurer in Nigeria in the country, AIICO Insurance Plc, has concluded discussions with FCMB Pensions Limited for the divestment of its interest in its pension subsidiary, AIICO Pension Managers Limited.

The proposed sale will see a full uptake of AIICO’s 70 per cent stake in the company is, however, subject to the approvals of the National Pension Commission (PenCom) and the Federal Competition and Consumer Protection Commission (FCCPC).

“The first is to unlock the value that is greater than holding the asset as a subsidiary now and in the future. The second reason is to deploy the ensuing capital in other assets where AIICO has a stronger competitive advantage, thereby maximising long-term value for its stakeholders. It is not driven by the Company’s recapitalisation plans which is on its own path and nearly complete,” confirmed Managing Director/CEO, Babatunde Fajemirokun, adding that the divestment is for two reasons.

A statement made available to Abeyanews by Segun Olalandu, Head, Strategic Marketing & Communications Department, the deal is strategically coming as the underwriter continues to shore up capital base for its repositioning in the insurance sector.

AIICO Insurance Plc recently kicked-off next phase in its recapitalization strategy as the firm submitted application to the Nigerian Stock Exchange (NSE). The development is said to be way ahead with its recapitalization plans.

The application to the NSE was for the approval and listing of 4,357,770,954 ordinary shares of fifty Kobo each at eighty Kobo per share, on the basis of five new ordinary shares for every thirteen ordinary shares held.

According to Olalandu, AIICO Insurance Plc shareholders now have the opportunity to increase their stake and position themselves for higher returns in a company with excellent prospects.

Abeyanews recalls that AIICO’s recapitalization journey started in earnest when the insurance regulator, the National Insurance Commission (NAICOM) set a strategic plan to increase the capacity of the industry to take on more risks. Responding to this, AIICO quickly articulated a clear path to meet the new minimum regulatory capital requirement.

The company followed through with regular communications at all stages in the execution of the strategy with its shareholders, who have been supportive of the efforts.

In February 2020, the company completed its private placement successfully with 38.83 per cent of its shares snapped up by two strategic investors; LeapFrog Nigeria Insurance Holdings Limited (28.24 per cent) and AIICO Bahamas Nigeria Limited (10.59 per cent), raising the share capital from N6.1bn to N11.3bn.

The Rights Issue is expected to generate N3.5bn, bringing the Company closer to meeting the required minimum paid-up capital of N18 billion. The exercise will be followed subsequently with a capitalisation (bonus) issue, which has a qualification date of 23 September 2020.

Olalandu noted that insurance industry, as with others, is facing daunting challenges as a result of the pandemic.

“As a result, NAICOM recently revised its recapitalization guidelines; 50 per cent of the new minimum capital to be achieved by December 31, 2020, while the deadline for overall completion has been extended till September 30, 2021. AIICO has however maintained an unbroken focus on its journey to its recapitalization,” he said.

The company also provided updates on the convertible loan instrument with the International Finance Corporation (IFC). It obtained a loan of US$7million from the IFC on June 30, 2015, at an interest rate of 6.5 per cent plus 6-month LIBOR for seven years with a moratorium period of 4 years on the principal. The loan had an embedded derivative (a conversion option) whereby IFC had the right to convert all or a portion of the outstanding principal amount into the equivalent number of shares of the Company.

The loan repayment is in six equal instalments starting in March 2020 and is expected to end in September 2022 except if prepaid before then. This convertible option, however, expired in December 2019 without the IFC exercising its option. Hence, the loan is now a straight loan without a conversion option till maturity.

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