The Observer (Kampala)

8 December 2013

Uganda: NIC Predicts 30 Per Cent Profit Jump for 2014

National Insurance Corporation is seeking Shs 8.4bn by inviting shareholders to either buy more shares or sell their rights. Nigerian firm Industrial and General Insurance Company Ltd (IGI) owns 60 per cent of the company.

The public owns the remaining 40 per cent. Of the 40 per cent, two investors hold 22 per cent of the company, and the rest are about 1,805 small shareholders. By email, Edgar Angumya asked NIC Managing Director Bayo Folayan about the company's plans.

What are the terms of the Rights Offer and what is the company's target in getting return from the capital raised?

The shares are on offer at Shs 26 per share and four shares for every five shares currently owned. It opened on November 22 and closes on December 13, 2013. The company projects a 30 per cent increase in profit after tax for 2014.

Rights issuing has always been the last resort for most companies due to the fear that it could be undersubscribed or not subscribed at all. What compelled NIC to sell to its shareholders when the liquidity on the Uganda Securities Exchange is still low?

The company was not compelled to sell to their shareholders. The shareholders, having assessed the prospects of the company and the opportunities opened to it, decided to take a proactive measure by putting more money into the company in order to position their company to take full advantage of the opportunities and reap good returns therefrom.

In 2012, claims resulting into payment increased by 35.9% with the corporation paying Shs 3.244bn. As the company tries to increase its investment portfolio into life insurance, local content insurance and agriculture, is the Shs 8.4bn sufficient to develop more products, or is there a chance that NIC will have to look for more capital?

The capital that is being raised now is adequate for the level of operation that NIC will be embarking on for the next five years. It must be understood that excessive capital does usually amount to what is called overtrading.

Essentially, NIC is an underwriting company. What usually determines the success of an underwriting company are adequate capital, a good reinsurance package and prudent underwriting. NIC with this Rights Issue will be having adequate capital.

We already have strong, capable and world-acclaimed partners as reinsurers and we have the best crops of underwriting personnel within this market. So, that places us in good stead to embark on the other ancillary complementary activities that you have referred to.

With the adoption of life insurance still very low at 0.65% of the population, what new innovations are to be adopted by the corporation so as to encourage life insurance?

We are spreading the sales of the products all over the country. NIC's spread all over the country gives us this advantage. Much concentration seems to have been put on Kampala and the major cities in the selling of life insurance. We are reaching out to the hinterland; more branches are to be established.

We have a variety of products targeted to the different segments of the society and designed to meet the varied needs of our customers. We will be coming up with some more too.

Following the contentious figures between Makerere and NIC over unpaid pensions, what has been the progress of the case and when are we likely to see this resolved.

The matter is still within the court process and it will be sub-judice to comment at this stage. However, the amicable resolution of the case is being encouraged by all the parties.

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