Directors of AXA Mansard Insurance Plc have scheduled an extraordinary general meeting for December 7, 2020, in Lagos, primarily seeking shareholders’ approval to convert N12.75bn for the purpose of issuing bonus shares as fully paid shares to the shareholders.
The recapitalisation Plan approved for recommendation to the shareholders by the board, according to the notice of meeting, will see the company creating 25.5bn new shares to be issued and allotted to those who are shareholders as of December 14, 2020 in the ratio of 17 new ordinary shares for every seven units.
The board is also proposing to the meeting that the nominal value of the company’s ordinary shares be altered from 50 kobo each to N2.00K each, “by the consolidation of every four shares held by each shareholder into one share.
Where the share consolidation results in a fraction of a share being held, the directors want the meeting to allow them round the “fraction down to the nearest whole share or zero,” as they may deem fit.
Explaining the proposed adjustments in the company’s share structure, the board recalled that the National Insurance Commission (NAICOM), by a circular of May 20, 2019, introduced new capital requirements for insurance companies in Nigeria, with a deadline of June 30, 2020. This was extended to December 30, 2020, through another circular of December 30, 2019, following the commission, in view of the disruptions arising from the COVID-19 pandemic, carried out another extension of the deadline, while segmenting the process into two Phase.
Phase one requires insurers to meet up to 50% of the minimum capital by December 31, 2020; and thereafter comply with the approved minimum paid-up capital not later than 30 September 2021.
The board assured that its proposed action (capitalizing its N5.25bn share premium account as of December 2019) is in line with the regulator’s definition of the component of minimum paid-up capital.
The company announced plans to secure an additional N12.75bn to meet the N18bn new capital requirement for composite insurance companies, assuring that “AXA Mansard has enough reserves across retained earnings, share premium and other capital reserves to meet the regulatory capital requirements for composite insurers.
The move will significantly raise Mansard’s outstanding shares from 10.5bn to 36bn shares, which will ultimately “impact the per share metrics of AXA Mansard shares, including Earnings Per Share, amongst other metrics.
To proactively manage such an outcome, therefore, “AXA Mansard is proposing a redenomination of the nominal share value of the AXA Mansard shares from N0.50, to N2.00.
The statement added that the share reconstruction would reduce its number of shares outstanding from 36bn shares (at a nominal share value of N0.50), which will shrink to 9.0bn after the share reconstruction is implemented.
It will also cut costs by reducing “the qualitative and quantitative costs of managing a larger shareholder register; besides allowing for more room to raise additional capital (because) having a relatively large number of shares outstanding impedes a company’s ability to issue bonus shares or raise additional capital.”