By Patience Saghana
NEM Insurance has commenced moves to raise N20 billion fresh capital from the investing community.Â Shareholders at theÂ 39th Annual General MeetingÂ Â of the campany held in Lagos recently passed a resolution authorising directors to raise additional N20 billion.
Managing Director, NEM Insurance Plc, Mr. Tope Smart saidÂ that the desire to increase the companyâ€™s capital base was necessitated by the challenging business environment posed by the global financial crisis.
According to Smart, â€œWe have just opened an office in Ghana and we are working on establishing similar offices in other West African countries so as to take advantage of the insurance market in these countries. We are not going to raise the money at once and we would ensure that our shareholders are carried along in the process.â€
The fresh capital would be rasiedÂ through a combination of equity and long-term debt instrument like public offer, rights issue or special placement in form of debenture either bu convertible or non-convertible; and bondÂ such as the board of directors of the company deem fit.
The company posted a gross premium of N4,002 million in 2008 as against N2,553.5 million in 2007. Profit-after-tax stood at N461.5 million in the year under review compared with N399.81 million in 2007.
A total of N691.0 million and N495.7 million were reported as diminution in quoted investments and provision for doubtful accounts, respectively just as the company approved a dividend of N0.04 per share
However, the President, Renaissance Shareholders Association of Nigeria, Mr. Olufemi Timothy advised the firm to ensure that it consults experts widely before it embarks on the recapitalisation exercise.
He stressed the fact that the bond market may be saturated and anybody entering it should be cautious.
Timothy advised, â€œThe issue of bond should be advisory and we must look at the price we want to offer to investors and we must not make it convertible to shares.
The bond market is almost saturated and so we must consider the best option that will not endanger shareholdersâ€™ bonus and dividends.â€
The companyâ€™s result showed that its Gross and Net Premium income increased by 56.7% and 49.4% respectively. Its gross premium income for 2008 was N4 billion, from N2.6 billionÂ achieved the previous year. The company also recorded a net premium income of N3.7 billion in 2008, as against N2.5 billion the previous year.
In terms of investment income, NEM Insurance achieved an increase by 64%, to N147.3 million, from N89.9 million in 2007.Â The companyâ€™s Chairman, Mr. Adewale Teluwo, said that the insurer still maintains its focus to be one of the best in the industry, saying that to do that, it must sustain its professionalism and excellent service delivery.