Kathmandu: Among 17 life insurers, four life insurance companies are under preparation to raise Rs. 11.52 bn equity capital through initial public offerings(IPOs) in a bid to meet the regulatory capital requirement.
Reliable Nepal Life Insurance, Sun Nepal Life Insurance, and IME Life Insurance have already applied to the Securities Board of Nepal (SEBON) for approval to issue IPOs at premiums. Citizen Life Insurance is making its final preparation to apply to SEBON.
Reliable Nepal has planned to issue 12 million shares at the rate of Rs. 212 including Rs. 112 premiums, Sun Nepal Life plans to issue 9.6 million shares at the rate of Rs. 250.55 including Rs.150.55 premiums and IME Life Insurance plans to issue 12 million shares at the rate of Rs. 276 including Rs. 176 premium. According to the sources, Citizen Life Insurance is underway to issue 1.25 million shares at the rate of Rs. 290 including Rs.190 premium.
The four life insurers will raise a total of Rs.11.52 bn including Rs. 7 bn from the allotment of 44.8 million shares. The SEBON has been reluctant to allow insurers to issue IPOs at a premium amid the absence of regulatory provisions under the Insurance Act 2079 to allow insurers for IPOs at a premium price.
The Nepal Insurance Authority has directed all life insurers to maintain at least Rs. 5 bn paid-up capital by Mid-April 2023. So, these life insurers are making their best attempt to issue IPOs to paid-up capital.
Reliable Nepal Life
The insurer’s paid-up capital is Rs. 2.8 bn. After the initial share issue, the paid-up capital will reach Rs. 4 bn. Rs.1.34 bn be accumulated in the reserve fund of the company with excess earnings from IPOs at a premium. At present, Rs. 1.28 bn is in its reserve fund. The company can easily raise paid-up capital to Rs. 5 bn with the distribution of reserve funds.
Sun Nepal Life
The insurer will collect Rs. 2.4 bn from the primary stock market when the IPOs are issued including the premium. Sun Nepal’s paid-up capital is Rs. 2.24 bn. After the IPO issue, the paid-up capital will reach 3.14 bn. Rs.1.44 bn will be accumulated in the reserve fund through premium. At present, the reserve fund of the company has Rs. 730 million. Rs.1.86 bn will be required to reach Rs. 5 bn paid-up capital. The company can easily raise equity capital using premium and reserve funds.
IME Life
The insurer’s paid-up capital is Rs. 2.8 bn. After the IPOs, the paid-up capital will reach Rs. 4 billion. The insurer will accumulate Rs. 2.11 bn in its reserve funds from the premiums earned through IPOs. At present, it has a reserve fund of Rs. 1 bn which will exceed Rs. 3 bn after the addition of premiums.
At present, Citizen Life’s paid-up capital is Rs. 2.62 bn. After the proposed IPOs, the paid-up capital will reach Rs. 3.75 bn. The insurer will need an additional Rs. 1.25 bn to reach Rs. 5 bn. The company can use the reserves accumulated from the premium and its current reserve to distribute stock dividends and raise the additional required equity capital. It has Rs. 1.25 bn in its reserve fund by the end of Paush 2079 and an additional Rs. 2.13 bn will be collected through premiums. The company will have an excess reserve fund for the paid-up capital.
