IFC may invest N18.26b in Leadway Assurance

The recapitalisation exercise in the insurance industry may have attracted the International Finance Corporation (IFC) investing about $14 million (N18.26 billion) in the equity share of Leadway Assurance Company Limited. The Guardian gathered that the management of Leadway Assurance and the IFC have mutually reached an agreement and IFC\'s board at its investment committee meeting recently has approved the investment. The proposed project, The Guardian learnt intends to strengthen and expand the operational capacity of the insurance company. \"The investment proposal envisages an equity contribution of up to $14 million by IFC and an institutional building programme for the company at a key stage in its strategic development\", it says. It also notes that the proposed IFC investment in Leadway will help support its development and promote the overall market for insurance in Nigeria and as well reduce the amount of capital leaving the country for the accounts of non-Nigerian insurers. IFC believes that insurance companies have a disproportionate high impact on developing economies because they are necessarily large investors who directly affect the general economy through their operations. According to them, in order to settle claims that may arise, insurers invest excess premium income to build a portfolio of financial assets and income-producing real estate, which can be called upon to pay-off any future claims that arise. \"A vibrant insurance industry can be a reliable source of long-term capital provision for the development of a healthy and dynamic private sector and long-term capital market in Nigeria\", IFC added. Also, its investment in the insurance company hopes to send a strong message of support for operational best practice and corporate governance initiatives in the Nigerian financial sector. However, the project is in keeping with IFC\'s mission of being a pioneer and proactively engaging in the development of financial markets in sub-Saharan Africa and represents IFC\'s first proposed investment into a primary composite insurer in Nigeria. Meanwhile, the company has announced N4.5 billion as its gross premium income at the end of financial year 2005, as against N3.9 billion recorded in 2004, representing an increase of 17 per cent growth. Besides, its profit before tax went up from N510.6 million in 2004 to N727.4 million in year 2005 resulting in an overall increase of 42 per cent. The company also improved its balance sheet size by 32 per cent from N7.8 billion in 2004 to N10.3 billion in 2005, recording 41.7 per cent increase in shareholders funds from N3.3 billion in 2004 to N4.7 billion in 2005, N472 million of which came by way of additional cash invested by shareholders to achieve the company\'s minimum capital base of N5 billion as a composite insurance company, in line with the announcement made by the former finance minister through the National Insurance Commission (NAICOM). The Managing Director of the company, Mr. Oye Hassan-Odukale, said that the asset base had risen to N117 billion, while investments also stood at N17.9 billion in December 31, 2005. He explained that after February 28, 2007, a new Leadway would emerge, which would go through strategic re-branding process after 35 years of operations and would also develop new business model to drive its operation in the market; at the same time optimise brokers relationship to further position the company among the league of insurance companies in Nigeria. - guardian
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