Lagos — The out-of-court settlement reached between the Federal Government and NICON Insurance has not resolved the problem the company is contending with as two companies, AAL and IGI are battling to see who becomes the core investor in the insurance giant.

In the last few years the Nigerian insurance industry has received considerable attention. A few years ago, the public viewed insurance with contempt. This credibility gap created not a small problem for the sector. However, the consolidation of the banking industry made attention to turn to the insurance sub-sector. The recapitalisation wave that swept through insurance saw a sharp reduction in the number of insurance companies as many were forced to merge or be acquired by bigger companies. The rest, as it is commonly said, is history.

However, in the last one year until the recent out-of-court settlement, the Federal Government had been at daggers drawn with the Jimoh Ibrahim-led NICON Insurance management. Ibrahim a lawyer and investor in the oil and gas sector had gone to court to challenge the power of the government to take over the management of the insurance company from him. The National Insurance Commission (NAICOM) also took certain steps, such as the suspension of the board and management of NICON Insurance, the board of Nigeria Re-Insurance and the constitution of an interim management and boards for the companies.

On one side too, the Industrial and General Insurance Plc (IGI) had shown interest in buying the Federal Government's equity holding in the company and was declared the reserve bidder by BPE. The NICON Insurance management led by Ibrahim that bought government's controlling shares viewed government's action as violation of the ownership structure and governing rules of the companies as contained in the memoranda and articles of association of the companies and relevant laws and took the Federal Government to court.

In a release issued by NAICOM in Abuja on December 6, 2007, the commission gave a number of reasons why it sacked the management and boards of NICON and Nigeria Re. The commission noted that the position of the company's payables but not paid as at November 21, 2007, amounted to N12.2 billion. It added that these outstanding liabilities had been the subject of continued embarrassing complaints from customers and suppliers.

It said NICON used to have one of the strongest reinsurance securities in the insurance industry covering life, general business, aviation, oil and gas by the foremost re-insurer in the world and other regional and local reinsurers. According to NAICOM, the leading reinsurers were forced to withdraw cover to NICON following the company's failure to settle requisite premiums and the withholding of reinsurance recoveries paid in respect of claims of major clients like NNPC. According to NAICOM, the reinsurance contract for NICON was subsequently transferred to Nigeria Re.

Interestingly, according to NAICOM, all insurers were required by law to maintain investment in specified instruments and maintain a register of such investments in the principal place of business of the insurer. The commission accused NICON of breaching the Insurance Act by transferring all its investments and investible funds to a third party company, NICON Investment Limited largely owned by Ibrahim. NAICOM said through this company, NICON Insurance funds were transferred to other companies registered as NICON but not having common ownership with NICON Insurance Plc.

Concerning Nigeria Re, NAICOM stated that the company was registered to accept the risks of reinsurance from all over the world. However, by a management buy-out in 2003, the Federal Government reduced its holding to 49 per cent. According to the commission, the 51 per cent management buy-out was funded by commercial banks, which later assumed ownership of those shares as a result of failure of the managers to repay the loan. The shares later transited to individuals, corporate bodies, and the Jigawa State Government. The shares of Jigawa State Government were sold to Global Fleet in 2006.

NAICOM said prior to the entry of Global Fleet, the corporation had made significant efforts to source funds through alliance with a foreign insurance firm, which had signed an MOU for the injection of 50 million dollars and also a private placement in the Nigerian market to shore up its capital base. These efforts, the commission said, were put in abeyance following the entry of Global Fleet, with the promise of a fresh capital injection. But it was only the Federal Government through BPE that injected a fresh fund of one billion naira into Nigeria Re.

All these made the government to intervene to save both NICON and Nigeria Re from collapse. Government's intervention did not include inviting Industrial and General Insurance Company Limited, which ought to have been the preferred bidder going by its statement of claim in a suit it filed at the Federal High Court, Abuja. By a letter dated February 28, 2008, President Umaru Musa Yar'Adua approved that the case instituted by Ibrahim against the Federal Government be settled out of court.

The terms of settlement included: "that within a period of 60 days of the inception of this agreement, the sum of N17.3 billion shall be injected by the shareholders, to meet the financing gap and recapitalisation threshold to enable NICON Insurance obtain license as a composite insurer; in respect of Nigeria Re, the sum of N7.3 billion shall be injected by the shareholders, in compliance with NAICOM's recapitalisation requirements as a pre- requisite to continue as re-insurers. Within 30 days of inception of this agreement, the plaintiffs shall invite the auditors to reconfirm the financing gap of N17.3 billion," the agreement stated.

One other term of settlement is that the boards of NICON and Nigeria Re should each comprise representatives of the joint shareholders according to their respective shareholding ratios. Also, the new board should advertise the position of managing director/CEO and recruit same through an open selection process. The person so selected would be subject to NAICOM's approval, in accordance with section 13 of the Insurance Act 2003.

From the foregoing terms, observers believe that BPE erred to have sold both NICON and Nigeria Re to a group, which did not have the capital outlay to handle an insurance behemoth like NICON or even Nigeria Re. For the purpose of selling NICON Insurance, the Bureau of Public Enterprises (BPE) had made Assurance Acquisition Ltd, the vehicle through which Ibrahim bought majority shareholding of NICON Insurance the preferred bidder. IGI feels that by the rules of the game AAL was not qualified to bid for the companies.

In its statement of claim filed by its attorneys Prof. S. A. Adesanya and Kola Awodein (SAN) respectively at the Federal High Court, Abuja, IGI contended that since AAL was incorporated or came into existence only on August 26, 2005, "it is improper, inexplicable, illegal and constitutes a manipulation to have included its name when the deadline by BPE's advertisement (for core investors) was May 25, 2005."

The company, IGI, contends further that the purported waiver of the statutory levy of N463, 957,145.32 in favour of AAL by former president Olusegun Obasanjo is null and void because the former president lacked authority to make such a waiver. The company stated that contrary to law, BPE sold 70 per cent of equity to AAL on October 11, 2005 and when questioned BPE's reply was that there was a resolution of the National Council on Privatisation. IGI insists that resolution is not synonymous with publication in official gazette.

IGI is praying the court to set aside the sale of NICON Insurance to AAL and declare it (IGI) the lawful bidder. BPE had made IGI the reserve bidder in the sale of NICON Insurance. This, the company says it has been unfairly treated.

The last may have not been heard about this matter.