Chiamaka Ajeamo, [email protected] 08060655687
One of Nigeria’s top leading insurance firm, LASACO Assurance Plc, last December 20, clocked 40 in business operations. Despite the harsh business space and the challenges encountered by the firm over the last four decades, it is poised to remain dogged and reliable in delivering services, while contributing significantly to the nation’s growth.
In an interactive session recently, the company’s Managing Director/CEO, Segun Balogun, speaks on the firm’s growth, recapitalisation and future plans.
Excerpts:
Journey so far
We have come a long way, LASACO Assurance Plc is a composite insurance and financial services company incorporated on December 20, 1979, under the Companies Decree of 1968. The Company, then known as Lagos State Assurance Company Limited obtained licence as an insurer on July 7, 1980 and commenced business operations on August 1, 1980.
LASACO became a Public Liability Company in 1991 when its shares were admitted for the first time to the Nigerian Stock Exchange (NSE) through listing by Introduction. Now in its fourth decade, the firm has grown considerably in size, business coverage, profits, capital base and assets with its operations spanning all classes of the insurance and special risks business.
At 40, we are proud of the company’s growth and we have just upgraded the headquarters to a modern building that can be compared to any modern office anywhere in the world. The building embodies all modern infrastructures and amenities. Though it is not 100 per cent completed but in a couple of weeks it will be. We have branches in South West, South-South, core North and Abuja. We are not too present in the East but this is one of our next growth areas where we may begin expansion soon.
Part of events to celebrate the company’s 40th anniversary, are enlightenment campaign as well as other various activities geared towards educating Nigerians on the relevance of insurance.
We choose this method because we want the impact and effects of LASACO at 40 to span over a long period of time. We are also going to be in the face of the press with other series of events for almost twelve months.
Recapitalisation
For us at LASACO what we have done first is to reconstruct our shares. We currently have over seven billion units of shares that have been issued over 37,000 Nigerians at 50 kobo. So we agreed that to realise the recapitalisation plan, we will reconstruct the shares to the extent that the number of shares that have been issued becomes less. So instead of over 7 billion shares that has been issued, we want to reduce it to one-third of that which is about two billion plus. So we still have almost eight billion of shares unissued.
The implication of reconstructing the shares, would mean that if you have one unit of shares of LASACO, instead of the one unit being valued at 30 kobo or 40 kobo, it means one unit of shares of LASACO will now be that amount multiplied by three. At the par value, 50 kobo multiplied by 3 is N1.50 kobo for one unit of shares. At the price of 30 kobo which it is currently trading, the value of share of LASACO is now 90 kobo.
What this means for investors is greater returns because instead of you getting dividend of 3 kobo like we paid in 2017, or the 4 kobo we paid in 2018, it then means that what we will pay would be more significant. Instead of paying 3 kobo, it will be 9 kobo, instead of 4 kobo, it will be 12 kobo and this will be more meaningful.
Even at three kobo that was paid, if you look at all the quoted companies in Nigeria, you don’t have many companies paying as much as 10 percent of the value of shares as dividend. If the value of your share is 30 kobo and you pay 3 kobo, that is 10 per cent. If the value of your share is 40 kobo and you pay 4 kobo, that is 12.5 percent. The big companies of Nigeria that their shares are priced at N30, N40, N120, N150, the kind of dividend they pay, by the time you put the dividend payment over the value of the shares, it is not usually as high as 10 percent or 12.5 percent. Yes, you can say, this is in kobo, but in terms of the ratio of the dividend we are paying over the stock, its more meaningful. You are getting better returns on your investment than the bigger ones.
The next step after the reconstruction of shares is to increase the number of units of shares that we have. We also said we should increase the authorized share capital from 10 billion units to 20 billion units. We recently got approval from the Corporate Affairs Commission (CAC), saying that our authorised share capital has been increased from 10 billion units to 20 billion units.
What this means is that we have almost 18 billion units of shares to issue. The challenge is not increasing the authorized share capital to accommodate the increase we want to do. The issue is where the money will come from.
So, what we have done as a company because have about 37,000 shareholders. Our top 50 shareholders control about 70 per cent of the shareholding and we have top 10 controlling almost 60 per cent. We have engaged these top 10 shareholders revealing our plan to them and they have given us permission to go ahead our plans promising to bring in money because we give them good dividend.
We are also going to offer Rights and do private placements because there are individuals and companies that have shown interest to buy into LASACO. We are currently seeking for approval from the Securities and Exchange Commission to come to the public to raise funds. So, we have very good assurances that the current major shareholders of LASACO will bring money to fulfill the recapitalization plan.
We also have contingency plans that are very clear and possible, in case of any failure which we don’t expect because we have firm assurances from these major shareholders that they are bringing more money. Mergers and Acquisitions is part of the contingency plan but it will be the last step if there need be because we want to stand alone
Hence, in summary with respect to recapitalization, we have N4 billion and we are going to N18 billion. So, we are looking for N13.4 billion and we are positive to get it. What we will use the funds to do is to augment our working capital, 30 per cent will be put into the working capital while 70 per cent will be used to expand our investment portfolio and real estate will take a larger bulk.
It is good enough that the National Insurance Commission (NAICOM) extended the deadline to December 2020. Our plans are to work as if the deadline is June 2020. Thus, by April, 2020, we should be done with our recapitalisation plans.
Post recapitalisation
The future plan of LASACO is to diversify. Insurers worldwide that are making good returns diversify and not just depend on insurance operations alone to survive. They diversify into other sectors of the economy to augment the income made from insurance. Our post recapitalisation plan is to be a major player in the hospitality, real estate industry and digital world.
Presently, the company’s volume of investment in real estate is N3.3 billion. So, in the next couple of years, you will see LASACO play in hospitality, real estate and the digital world.