Consolidated Hallmark to raise N4.5 billion through rights issue

Consolidated Hallmark Insurance Plc has secured the approval of its shareholders to raise additional capital through a rights issue.

The rights issue is of Four Billion, Five Hundred Million Naira Only (N4,500,000,000) which could be raised via issuance of shares, long-term debt, preference shares, convertible and non-convertible securities, depository receipts or any other instrument determined by the Directors of the insurance firm.

The Details: The company made this disclosure in a notification to the Nigerian Stock Exchange (NSE), after announcing shareholders’ resolutions at its Extra-Ordinary General Meeting (AGM), which held Thursday, November 21, 2019 in Ikeja, Lagos.

The rights issue is, however, subject to the approval of regulatory authorities.

What this means: It is of common knowledge that a rights issue is a way for companies to raise capital. In this regard, capital is raised when existing shareholders pay for the new shares that are being issued.

[READ MORE: International Breweries seeks capital raise through rights issue]

The firm may use the raised capital to acquire assets, make a take-over, repay debts or save itself from bankruptcy. Although a company can raise capital in other ways, such as borrowing from banks or issuing bonds, there can be times when the companies may be reluctant to seek credits from banks because of the high-interest rate incurred by loans.

In addition, the shareholders of Consolidated Hallmark Insurance gave the directors the go-ahead to commence talks on possible mergers and acquisition concerning the future of of the insurance firm. Also, the directors were empowered to draw up, sign documents and appoint advisers regarding the matter where necessary. This line of action is also subject to approval of shareholders and regulatory authorities

It is believed that this action is consequent upon the recapitalisation exercise of the National Insurance Commission (NAICOM) which is expected to boost the insurance industry.

Recall that early this year, NAICOM proposed an increment of the capital base for insurance firms.

• Life insurance underwriting firms were mandated to shore up their capital base from N2 billion to N8 billion.
• Insurance firms underwriting general business were mandated to shore up their capital from N3 billion to N10 billion.
• Composite insurance firms were asked to raise their capital from N5 billion to N18 billion.
• Reinsurance firms moved their current minimum capital of N10 billion to N20 billion.