Ahead of its 2023 Annual General Meeting, WAICA Reinsurance completed a major recapitalisation exercise during the first quarter of the year, raising US$23.469million in core capital, which brought the company’s total share capital to US$88.439million, up from US$64.876million as at the end of 2022. This contributed to a similarly sharp rise in total shareholders’ funds to US$161.555million by the end of the first quarter of this year, up from US$132,612million as at the turn of the year.
Recapitalisation was achieved through a rights issue for existing shareholders, under which 10 million ordinary shares each of a par value of US$1 were offered at a market price of US$2.72 per share. The rights issue was offered at a ratio of one new share for every 4.9177 ordinary shares already held. The offer opened on February 16, 2023 and closed on March 10, by which time existing shareholders had subscribed to 9,628,138 shares, translating to an 86.28 percent success rate.
Explaining the rationale for the fresh capital injection to shareholders of the company at it 2023 AGM held in Accra last week, the company’s Chairman, Kofi Duffuor – who is also Group CEO of Ghana’s Star Assurance Group – asserted that the rights issue was done to “strategically position the corporation to underwrite larger businesses – especially in the oil and gas sector, expand ICT infrastructure, undertake some equity investments, and ensure a strong balance sheet that will make us more competitive in the real insurance market. The additional capital will also augment our working capital, enable us strengthen our subsidiaries, and boost investment income”.
As a proactive measure, the company also envisages the formal registration of its operations in Côte d’Ivoire over the medium term, thereby transforming it into a fully-fledged subsidiary of WAICA Re with all the privileges of a domestic insurance operator.
Actually, the new capital injection is just the first phase of a wider recapitalisation exercise which aims to increase the number of shares in issue to 100 million in six tranches. The plan also called for the invitation of new shareholders to invest in the company. The first tranche of 10 million shares was originally scheduled to be issued in 2020 but the outbreak of COVID-19 persuaded the company to suspend the plans until this year.
During the intervening period, however, new developments have forced the company to change the allocation of the new capital somewhat. Specifically, Ghana’s Domestic Debt Exchange Programme has required the company to create a financial buffer to cushion it against the inevitable impact of the initiative on its balance sheet. Indeed the recapitalisation represents a clear and effective response to the inevitable downgrading of WAICA Re’s financial strength rating by rating agency AM BEST, which lowered WAICA Re’s grade from FSR B+ (good) to B (fair) with a negative outlook, a fate shared by all the corporate entities in Ghana tracked by the ratings agency.
Ghana is one of the major countries in which it operates, the others being Nigeria, Liberia, The Gambia, Sierra Leone, Côte d’Ivoire, Tunisia, Kenya, Zimbabwe. The company holds US$2.2million of Government of Ghana bonds, which is 13.6 percent of its total investment portfolio. The total fixed income portfolio, inclusive of Government of Ghana bonds, was US$163.6million as at the turn of the year.
The proactive recapitalisation will ensure that WAICA Re has adequate financial solidity to both retain its balance sheet strength and expand across markets.
“We wish to state categorically that in absolute terms, our financials – as at the reporting date – remain very strong as presented in the (2022) audited account,” asserts Kofi Dufour. “We have run various financial and quantitative scenarios to ascertain the Government of Ghana’s economic actions on our operations and financial assets domiciled in Ghana. We expect a moderate impact on our financial assets and a minimal impact on our operations. This year’s rights issue will buffer against economic shocks in the foreseeable future.”
To be sure, shareholders have good reason to feel confident enough to put up the new capital being asked of them.
In 2022, Gross Written Premium increased by 40 percent from US$153.3million in 2021 to US$214.2million last year. Half of this came from property, followed by causality with 16 percent, and engineering 11 percent. Oil and gas attracted 10 percent, marine and aviation 7 percent, and both motor and life 3 percent each.
WAICA Re’s fastest premium growth was produced in Liberia with gross written premiums growing by 229 percent, Kenya following with 105 percent, and Zimbabwe with 94 percent. Ghana’s market was basically stagnant with premiums only increasing by 2 percent.
Despite the challenges in Ghana deriving from public debt restructuring, investment and other income increased by 16 percent from US$4.6million 2021 to US$ 7.2million last year.
Just as impressively, claims incurred actually reduced in 2022 at US$55.691million, this being 20 percent of the figure incurred in the previous year. Facultative claims contributed 59 percent of total claims paid while treaty claims accounted for 41 percent. Management expense growth was restricted to 23 percent, and although bigger business volumes led to a sharp 47 percent increase in commissions paid, net underwriting profit grew by 31 percent to US$21.605million from US$19.431 in 2021.
All these culminated in pre-tax profits of US$29.898million for 2022, up by 41 percent over the US$21.163million generated in 2021.
