Shareholders of Prestige Assurance Plc are meeting later this month to consider creation of additional new 14 billion ordinary shares and a new capital raising exercise to boost the capital base of the insurance company.

Prestige Assurance plans to increase its authorised share capital from N3 billion of 6.0 billion ordinary shares of 50 kobo each to N10 billion of 20 billion ordinary shares of 50 kobo each through the creation of additional 14 billion ordinary shares of 50 kobo each.

At the meeting this month-end, shareholders are expected to authorise the board of directors of the company to raise “capital by way most suitable to the company in line with the recapitalisation requirement of the National Insurance Commission”.

The increase in authorized share capital is meant to create headroom for a new capital raising exercise. Prestige Assurance currently has total issued share capital of 5.38 billion ordinary shares of 50 kobo each out of its current total authorised share capital of 6.0 billion ordinary shares.

Market analysts said Prestige Assurance might consider raising capital through a rights issue, the most preferred instrument by most fund-raising companies in recent period. The New India Assurance Company Limited, Mumbai, the precursor and founder of Prestige Assurance, holds 69.50 per cent majority equity stake in the Nigerian subsidiary while Leadway Assurance Company, an unlisted Nigerian insurance company, holds 11.47 per cent equity stake.

Prestige Assurance had in November 2018 distributed 1.53 billion ordinary shares of 50 kobo each to its shareholders as bonus shares, almost restoring 1.6 billion ordinary shares that it had cancelled under a recent capital restructuring. The company distributed bonus shares of 41 ordinary shares of 50 kobo each for every 100 ordinary shares of 50 kobo each held as at the close of business on November 27, 2018.

The company capitalised N782.57 million from its share premium account to pay for the new shares issuance. The scrip issue increased the company’s issued share capital from N1.91 billion or 3.82 billion ordinary shares to N2.69 billion or 5.38 billion ordinary shares.

Prestige Assurance had undergone a major capital restructuring in 2018. The insurance company had in June 2018 concluded share reconstruction exercise that resulted in cancellation of about 1.6 billion ordinary shares of 50 kobo each. The reconstruction was undertaken to remove bubble assets.

Under the share reconstruction, Prestige Assurance had reduced its share capital from N2.685 billion or 5.370 billion ordinary shares of 50 kobo each to N1.909 billion or 3.817 billion ordinary shares of 50 kobo each in the issued and fully paid up ordinary shares of the company.

This led to reduction of N776 million or 1.55 billion ordinary shares. “The share capital so reduced will be applied in writing off the capital of the company which is lost or unrepresented by available assets,” according to a regulatory filing on the reconstruction.

Prestige Assurance had stated that the essence of the capital reconstruction was to enable it wipe out its accumulated retained losses of N776.511 million.

Key extracts of the audited report and accounts for the year ended December 31, 2018 showed that Prestige Assurance’s gross premium increased from N3.39 billion in 2017 to N4.66 billion. Profit before tax however decreased from N697.99 million in 2017 to N645.43 million in 2018. After taxes, net profit dropped from N531.84 million in 2017 to N423.8 million in 2018. With these, earnings per share declined from 9.90 kobo in 2017 to 7.89 kobo in 2018.