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Insurers Charged to Embrace Merger, Acquisition
- By Rosemary Onuoha
- Published October 28th, 2009
- InsuranceWorld
- Unrated
FOLLOWING the dwindling fortunes of underwriting firms, experts have called for their voluntary mergers and acquisition.
The call which initially emanated from the National Insurance Commission (Naicom) postulates that two or more insurance companies coming together to form one will give them the needed strength to compete favourably.
Mr. Fola Daniel, Commissioner for Insurance (CFI) who stated this noted that a situation where the industry has about 20 strong companies as against the current 59 will be ideal.
Meanwhile Mr. Joe Ameh has joined the crusade for mergers and acquisition stating that as the capital market continues to record downturns, insurance companies may continue to record erosion of capital.
Ameh who is the former managing director of Nigeria Reinsurance Plc (Nig Re) told BusinessWorld that with the turn of events in the stock market, investments of some insurance companies may have been eroded since they invested significant portion of their capital in the market.
Ameh reasoned that the capital base of insurance companies that was shored up in the wake of the consolidation exercise was meant to be deployed for businesses by these companies, but some went ahead to invest in stocks, stating, “With crisis in the capital market the value of stock have been eroded to a large extent.” In his words, “If your business turns out to be unprofitable, then it means that you have used up your capital. It is also possible that you have invested your capital in a lot of stocks. Now if your capital has lost value in line with the minimum capital that is allowable in the industry, then you must beef it up or merge to ensure that you retain that same level of stipulated capital.” Ameh stressed that for companies to be able to draw on their internal strength for competition, there has to be mergers. In a similar vein, Mr. Ayo Banmeke of the Nigerian National Petroleam Corpration (NNPC) told BusinessWorld that 45 per cent of the net assets of insurance companies’ balance sheet are on the stock market; hence whatever impact the current trend may be having on their investments will surely affect the shareholders interest in the various companies.
Ameh therefore called on underwriters to embrace the option of mergers and acquisition with decorum and shun all attitude of ‘I am in charge’ which has been part of the bane of the sector.
The call which initially emanated from the National Insurance Commission (Naicom) postulates that two or more insurance companies coming together to form one will give them the needed strength to compete favourably.
Mr. Fola Daniel, Commissioner for Insurance (CFI) who stated this noted that a situation where the industry has about 20 strong companies as against the current 59 will be ideal.
Meanwhile Mr. Joe Ameh has joined the crusade for mergers and acquisition stating that as the capital market continues to record downturns, insurance companies may continue to record erosion of capital.
Ameh who is the former managing director of Nigeria Reinsurance Plc (Nig Re) told BusinessWorld that with the turn of events in the stock market, investments of some insurance companies may have been eroded since they invested significant portion of their capital in the market.
Ameh reasoned that the capital base of insurance companies that was shored up in the wake of the consolidation exercise was meant to be deployed for businesses by these companies, but some went ahead to invest in stocks, stating, “With crisis in the capital market the value of stock have been eroded to a large extent.” In his words, “If your business turns out to be unprofitable, then it means that you have used up your capital. It is also possible that you have invested your capital in a lot of stocks. Now if your capital has lost value in line with the minimum capital that is allowable in the industry, then you must beef it up or merge to ensure that you retain that same level of stipulated capital.” Ameh stressed that for companies to be able to draw on their internal strength for competition, there has to be mergers. In a similar vein, Mr. Ayo Banmeke of the Nigerian National Petroleam Corpration (NNPC) told BusinessWorld that 45 per cent of the net assets of insurance companies’ balance sheet are on the stock market; hence whatever impact the current trend may be having on their investments will surely affect the shareholders interest in the various companies.
Ameh therefore called on underwriters to embrace the option of mergers and acquisition with decorum and shun all attitude of ‘I am in charge’ which has been part of the bane of the sector.
