UNIC Insurance: NAICOM accused of calling in the undertakers

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Matthew Otoijagha
Just as the National Insurance Commission (NAICOM) came out last week to confirm the takeover of Unic Insurance, the company’s Shareholders have also come out to express concerns over the intervention made by NAICOM in the insurance firm, arguing that the regulator’s actions came a bit late as the firm is almost at the verge of collapse.

 

Speaking to Stockswatch on the delayed intervention, the Managing Director of Lancelot Ventures Limited, Adebayo Adeleke; who is also a prominent member of Independent Shareholders Association of Nigeria (ISAN), said: “I think NAICOM should attend more to the sick, than calling in the undertakers.
“NAICOM should encourage mergers and acquisitions. It can midwife an arrangement like Central Bank of Nigeria (CBN) did between Oceanic Bank and EcoBank.”
Another shareholder Activist and Co-Founder, Nigeria Shareholders Solidarity Association (NSSA), Alhaji Gbadebo Olatokunbo, speaking in the same vain called on NAICOM to be proactive in executing its regulatory functions. According to him, some shareholders cannot even remember if they have shares in UNIC Insurance, owing to the fact that the firm has failed over the years to give return on investment.
He noted that shareholders are presently not happy with many insurance companies due to their non-performance, stressing that it is the duty of NAICOM as the industry regulator to help the firms perform according to stipulated rules.
According to him, “If NAICOM has been proactive like the Nigerian Stock Exchange (NSE); they would not have waited for this long before intervening in UNIC Insurance. And most of the insurance companies would not have been behaving the way they behave.
‘‘No investor is happy with insurance companies. For many years, we have not been getting reasonable return on investments, and the companies are living big, directors are taking their allowances and staff, their salaries. They have forgotten their investors.”
Olatokunbo noted that most insurance companies have been disappointments to investors, whilst calling on NAICOM to take urgent steps to save other ailing firms. “To me NAICOM did not do anything, because they waited for too long, if they have come in before now, they would have made more impact on the firm.
‘‘For them to really rejuvenate the firm, it will take a long time, whereas, if they have been proactive enough and come in on time, may be it would have ginger some other things to come up. They have allowed the company to almost die and now thinking of what to do with the corpse. They should not expect any accolade from investors.”
NAICOM confirms takeover
Recall that NAICOM had last week confirmed the take-over of the management of UNIC Insurance Plc., one of the ailing firms and set up a 4-man interim board to pilot the affairs of the company for the next six months.
 
According to NAICOM, Chief Samuel Ordu, has been appointed as Chairman of the underwriting firm. Ordu was NAICOM’s former Director of Finance and Accounts. The interim Managing Director/Chief Executive Officer is Theophilus Eke, while other members are Ifeyinwa Ann Momah and Nicholas Shaiyen.
 
Giving details for what the Commission wants done in the company, NAICOM noted that the interim board has an initial period of six months to do a forensic on the financial position, as well as, the corporate governance failures observed in the course of reviewing the financial statement of the company.
 
The firm’s shareholders’ funds as at 2016, stood at N587.67 million, which was far below the statutory N2 billion for life insurers. Its total assets, N4.17 billion; gross premium, N38.769 million and management expenses N244, 929, which represents 6.32 per cent.
 
Why the takeover:
After series of warnings for ailing insurance companies to boost their capital, NAICOM finally lowered its hammer on one of them last week by taking over the management.

The underwriting firm, a once vibrant organization with a robust rescue and ambulance services, has been on its’ kneels for about two years due to dwindling capital base.
 
Available records show that as at 2016, the firm’s shareholders’ funds stood at N587.67 million, which is far below the statutory N2 billion for life insurers. Its total assets, N4.17 billion; gross premium, N38.769 million and management expenses N244, 929 million (6.32 per cent).
 
While announcing its takeover, the Commission set up a four-man interim board to pilot the affairs of the company for the next six months.
 
 
 
Penultimate week, NAICOM had advised owners of ailing insurance firms to urgently recapitalize to prevent it from doing ‘the needful’. Deputy Commissioner, Technical, NAICOM, Thomas Sunday; who disclosed this at a forum in Lagos, said the commission had been careful in taking regulatory actions against the firm’s because burial is often more expensive than taking treatment.
 
According to him, the commission will be left with no other choice than to do the needful if the owners failed to save the firms by injecting fresh funds into them. He noted that the commission had had to intervene, when some of the firms wanted to underwrite high profiled risks which claims could pull them down.
 
According to him, mergers and acquisitions remain the best options for ailing firms, whilst urging the owners to prevent what happened in the last industry’s recapitalization, where a few days to the deadline, some companies ran from pillar to post searching for who to take them over.
 
Other insurance firms on NAICOM’s watch list:
Other companies on the watch list of the regulator are Gold link Insurance Plc., Spring Life Assurance Plc., Plc. and International Energy Insurance (IEI) Plc. while the case of Alliance & General Insurance and Alliance & General Life Assurance Plc. is already in court. Industrial and General Insurance (IGI) is pulling back from the precipice to regain its market share.
 
Stocks-watch went to town to interview other interest groups on the likely implications of NAICOM’s intervention in Unic insurance, as well as, on the stocks market.
 
Aruna Kebira, a stockbroker with Gruene Capital Limited in view explained that NAICOM is a regulator that regulates the insurance companies, while Unic insurance is an insurance company. According to him, ‘‘a regulator takes over a company for one thing and that is to prevent the company from going insolvent. It is either that they are over trading or there is mismanagement of the company. It is the duty of NAICOM TO save shareholders’ fund that is invested in Unic.
‘’NAICOM is coming in to not to sit on the company’s Board, but to appoint a Board that will make a return for the shareholders.  A Regulator doesn’t take-over the regulated unless there are incidences that are not consistent with laydown rules or policies and regulations of the regulator.
‘‘The takeover of the company will affect the confidence level of the shareholders. If the past management were running the company well, there would be no need for NAICOM to come and take it over. Now that the company has been taken over, it will create apathy for stakeholders of the company and naturally some shareholders will be exiting because they cannot foretell what will happen in the future. If you have investment in Unic under this situation you have to exit.
‘‘For example, if you’re travelling and suddenly the vehicle you’re in is shaky, you first get out, and then you move in again, when you’re now sure it is safe to get into the vehicle again. From the foregoing, it is certain that some investors in the company would want to opt out until the condition of the company improves.
‘‘But contrary to that, do you know that Unic insurance did maximum on Friday as it did 21kobo and this morning (Monday) it is opening at 22kobo, which means that the share price might rise to 23kobo at the close of the day. All these show that despite the condition of the company, there is still demand for its shares.
You can see that when the management of the stock exchange decided to remove the bottom on the nominal prices of stocks in the market, you observed that the market was awash with liquidity, those stocks that were trading at 50kobo before are now trading in the market.  Examples are Lasaco, and others.
The impact of the crisis of Unic and IEI on the stock market might not be much. Now if you consider the weight of Unic Insurance or International Energy Insurance (IEI) against that of Dangote Cement, you discover that the takeover of Unic would have negligible impact on the market.
Mr. Sunny Nwosu, former Chairman of the Independent Shareholder’s Association of Nigeria in his response said that what happened to Unic insurance was a culmination of the series of negative events that was allowed to develop in the company.
According to him, ‘‘Now that NAICOM have decided to intervene, I believe it is the most appropriate body at this time to carry out the intervention. I believe problem in the Group structure could possibly have been responsible for the crisis, what NAICOM need to do now is to Address the corporate governance issues which were cited as reasons for its intervention, as well as, work to restructure the company.’’
Mr. Charles O. Fakrogha, Foresight stockbrokers Limited said that ‘‘NAICOM takeover was good for the company, as it would now return the company on the part of profitability, after a new management has been reconstituted for the insurance firm.
If NAICOM is prepared to do what is necessary, the takeover will certainly improve the company and also sanitize the industry and the implications will be good for the company’s shareholders.
Another Stockbroker, Mr. Jacob Alabi of Profound Securities Limited in his submission stated that NAICOM intervention must be bad news for the shareholders of Unic insurance. According to him, ‘‘NAICOM’s intervention is certainly not good for the shareholders, because they are the risk bearers of the company. If anything goes wrong with the company, they are the ones to bear the loss.
Considering the timing of the regulator’s intervention, whether their coming is timely or later, the shareholders bears the brunt of whatever happens to the company. Look at what happened in the banking industry with AMCON’s intervention. Where they able to revive the banks they took over?

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