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NAICOM warns on false declaration in merger talks

Posted by By Patience Saghana on 2006/06/28 | Views: 641 |

NAICOM warns on false declaration in merger talks

IN order to guide against disagreement that may arise from misleading information during merger, the National Insurance Commission (NAICOM) has admonished insurance companies.....

IN order to guide against disagreement that may arise from misleading information during merger, the National Insurance Commission (NAICOM) has admonished insurance companies to ensure full disclosure of facts to merger partners so as to prevent last minute break off on negotiations which can, spell doom for such merger.

Commissioner for Insurance, Chief Emmanuel Chukwulozie, who sounded the note of warning at the 35th Annual Education Conference of the Chartered Insurance Institution of Nigeria (CIIN) held in Abuja recently, said the commission’s efforts would only be complemented if companies that are into merger open up to themselves to allow a successful merger and also enable the parties to scale through the hurdle of recapitalisation.

According to him, “Early acquisition and merger discussions are almost always conducted under a shroud of secrecy. Although such negotiations are eventually made public but in most cases, parties involved in merger fall apart too soon or too late and the company could be accused of failing to disclose material information or of making material misrepresentations and thus spell doom for all the parties at the long run.”

Speaking on the theme of the CIIN conference, "Recapitalisation, Consolidation and Corporate Rebranding of the Nigerian Insurance Industry", the Insurance Commissioner said that in a situation where a document containing such a representation is disclosed, if additional material facts exist, such as those contradicting or qualifying the disclosure of the original representation, such omission makes that disclosure misleading, a company would also be required to disclose those facts.

“The recapitalisation and consolidation exercise affords a variety of options in attaining the desired goal. While some firms are sourcing for funds through private placements, others are doing so through the capital market. Some have opted for mergers or takeovers and may still proceed to the capital market or via private placements to conclude their capital drive,” he said, warning that, “we need to examine some of those options more closely for a better appreciation of the entire exercise.

"The requirement of section 30 (4) & (5) of Insurance Act 2003 which made it mandatory to publish notice for merger or acquisition is an attempt to protect shareholders and policy holders so that they are not caught unawares in respect of the transaction."
Continuing, he stated, "The three months period is sufficient time within which any party concerned can raise an objection to the merger or acquisition.”

Insurance companies that have gone into merger or are into merger talks are Goldlink Insurance and Lexington Insurance; Staco Insurance Plc and Summit Insurance; ELMAC Insurance, Atlantic Insurance and Admiral Insurance; Custodian Insurance and Signal Insurance; Regency Insurance, Nigerian Alliance Assurance Corporation, Capital Express General Insurance and Destiny Insurance; Royal Exchange Assurance of Nigerian, Lion of Africa Insurance and African Prudential Insurance Company; Equity Indemnity Insurance Phoenix Assurance of Nigeria and First Assurance Company; Law Union and Rock Insurance with Royal Trust Insurance and Worldwide Insurance. Vanguard investigations have also revealed that discussion is going on between NEM Insurance Plc and ACEN Insurance.

Mrs Seyi Ifaturoti, CIIN President, said that the various trade groups in the industry and the CIIN had pledged their total support to insurance and reinsurance companies concerned in the exercise and thus appealed that the practitioners should endeavour not to mar their efforts by whithholding facts or engage in any form of secrecy. “The challenges of the last few months cannot be adequately appraised without putting in perspective the ripple of the new capital requirement. The institute was privileged to join other stakeholders in addressing the rationale for an appropriate quantum of capital requirements,” she said.

All that, Ifaturoti said was in the past now, stating that the insurance industry had come to appreciate government reform and the need for the sector to be adequately capitalised, adding, “we (CIIN) also pledge our unalloyed support in ensuring that the on-going recapitalisation and consolidation exercise is smoothly executed.”

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Comments (3)

Abieyuwa(Edo, Nigeria)says...

Otasowie means evening life is better than morning life. There is an error in your “evening life is better than evening life”?

Naija g(Houston, Minnesota, US)says...

Sokari doesn’t mean joy. Joy is Biobela. Go to the village and ask the meaning of the name.

Fay(Katy, Texas, US)says...

Actually translates to bravehearted.