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Sovereign Trust Insurance lists 4.17 billion rights shares

Sovereign Trust Insurance Plc has listed additional 4.17 billion ordinary shares of 50 kobo each on the Nigerian Stock Exchange (NSE), the last step in its recent capital raising process.

Head, Listings Regulation Department, Nigerian Stock Exchange (NSE), Godstime Iwenekhai, stated that the additional shares arose from the company’s recent rights issue.

He explained that while the rights issue recorded 72.5 per cent subscription, the additional ordinary shares listed had been registered by the Securities and Exchange Commission (SEC).

With the listing of the additional 4.17 billion ordinary shares, the total issued and fully paid up shares of Sovereign Trust Insurance has increased from 8.34 billion ordinary shares of 50 kobo each to 12.51 billion ordinary shares of 50 kobo each.

STI had sought to raise N2.09 billion from existing shareholders to beef up its capital base to position it in better stead for large-ticket transactions.

STI offered 4.17 billion ordinary shares of 50 kobo each at a price of 50 per share. As rights, the new shares issued were pre-allotted on the basis of one new share for every two ordinary shares held as at the close of business on January 15, 2019.

Application list for the rights issue had opened on Monday June 24, 2019 and was scheduled to close on Wednesday July 31, 2019. However, the company secured regulatory approvals to extend the application period to Wednesday August 21, 2019.

Shareholders of Sovereign Trust had approved a new capital raising plan for the insurance company. Shareholders authorised the board of the company to create 5.0 billion new ordinary shares of 50 kobo each to increase its authorised share capital to N10 billion of 20.0 billion ordinary shares of 50 kobo each.

Shareholders also approved the proposal to raise “additional equity capital for the company up to the maximum of the authorised share capital” with additional mandate to the board to absorb excess money in the event of oversubscription of the initial offer.

The National Insurance Commission (NAICOM) recently released new capital requirements for insurance companies. Many insurance companies are expected to raise funds to beef up their capital base. Many analysts also expected a considerable consolidation of the Nigerian insurance sector, with capitalisation as a major benchmark.

NAICOM had in May 2019 released new capital requirements for insurance businesses with a 13-month compliance period for operators to shore up their minimum capital base to the required level. The minimum paid-up share capital of a life insurance company was increased from N2 billion to N8 billion, non-life insurance from N3 billion to N10 billion, composite insurance from N5 billion to N18 billion while re-insurance companies were directed to raise their capital base from N10 billion to N20 billion. Insurance companies are required to comply fully with the new minimum capital base by June 30, 2020.

Market analysts had expressed fears that the huge price difference between the rights’ price and STI’s market price might adversely affect retail subscription to the rights issue as investors will rationally opt for the best price on offer.

STI’s offer price of 50 kobo per share was about 150 per cent above trading price of around 20 kobo at the NSE.

Some analysts however noted that rights issue may provide opportunity for strategic investors who may be willing to premium price to increase their shareholdings in the insurance company through additional subscription and purchase of traded rights.

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