By Nike Popoola

Tuesday, 1 Feb 2011

Contrary to predictions that there would be an upsurge of mergers and acquisitions in the insurance sector when the Central Bank of Nigeria ordered banks to divest from non-banking businesses, investigation by our correspondent has revealed that the reverse is the case.

The CBN had, after the repeal of the universal banking model, ordered Deposit Money Banks that veered into other businesses in the financial services sector other than core banking operations, to divest from such ventures and concentrate on their core mandate.

Instead of exploring merger deals with local insurance companies, some of the banks that have insurance subsidiaries are currently looking for foreign investors to take over the firms, while others are relinquishing their ownership control.

Some managing directors of bank-owned insurance companies, who spoke to our correspondent on the condition of anonymity, confirmed that they were looking for foreign investors.

One of them said, “We are doing well financially, we have our subsidiary firms that are also doing fine. Although foreign investors are already showing interest in us, the necessary procedures, which include the signing of Memorandum of Understanding, have not yet been done.”

Earlier, the board of Guaranty Trust Assurance Plc had notified the Nigerian Stock Exchange of its plan to sell the company in compliance with the CBN directive.

The Chairman, Union Assurance Limited, Mrs. Funke Osibodu, told our correspondent during the company’s last Annual General Meeting in Lagos that the board was coming up with a plan on what to do with the company, which is subsidiary.

She had said, “We will come up with a proposal on our plan in terms of whether we want to hold the group holding, which is basically what we have now, or bank holding as Union Bank Plc. We have not taken a decision yet, but whatever that decision is, Union Assurance will continue to be very close to us.”

No fewer than 12 banks have substantial stake in different insurance companies, according to the National Insurance Commission.

Although, all the managing directors of the insurance companies not owned by banks, who spoke with our correspondent, expressed their readiness to acquire or merge with the bank-owned firms in the order to help them comply with CBN directive, they, however, said that the bank subsidiaries were not keen on approaching them for such deals.

The Managing Director, Niger Insurance Plc, one of the biggest insurance companies in the country, Mr. Justus Uranta, said that the company had openings for acquisition of other firms.

He pointed out that before a company could decide on mergers and acquisitions, it would first consider many things such as the culture and prospects of the firm to be acquired.

Uranta said, “We will consider the issue of due diligence; you need to ensure that you are not inheriting more liabilities than assets. We are ready to acquire but we will only consider one that is very suitable, and why not? We have to ensure that we reduce the high unemployment rate, which is not good for our economy.”

Source: Punch