Stakeholders explore N59tr real estate investment for higher returns

By Bankole Orimisan
 Few underwriting companies in Nigeria’s insurance industry are considering tapping into opportunities in the real estate sector, which valuers estimated to worth about N59trillion under a
post-recapitalisation era.
 
The Guardian learnt that although real estate investment is not admissible as a part of the paid-up capital in the ongoing exercise, insurers perceive property as another investment haven.
Many operators after the regulatory-induced recapitalisation will have enough funds at their disposal to invest in profitable sectors, to give good returns to their shareholders.
 
In the current exercise, the National Insurance Commission (NAICOM), had raised the minimum paid-up share capital of a Life insurance company from N2billion to N8billion; Non-Life insurance from N3billion to N10billion and Composite insurance from N5billion to N18billion.

 
Re-insurance companies were directed to raise their capital base from N10billion to N20billion.
Experts believe that post-recapitalisation; surviving underwriters may be overwhelmed by too much liquidity, and would, therefore, explore where to plugin, for which real estate offers a lot of attractions.
 
The likes of LASACO Assurance Plc, Cornerstone Insurance Plc, Anchor Insurance Plc, Royal Exchange Plc, among others, are already planning for post-recapitalisation, and looking towards the housing sector, just as AXA Mansard Insurance Plc, AllCO Insurance Plc are also gearing up.

Although, there is a glut in the property market currently, experts believe the return on investment (RoI) in the sector is still higher, thereby making it the toast for operators.

Meanwhile, organisations like NICON Insurance, Niger Insurance Plc, LASACO assurance Plc, among others, have sizeable investments in properties and are currently looking for buyers for some of them to augment their capital in a bid to meet the recapitalisation deadline.
  Although they are planning to sell now to resolve a short-term challenge, which borders on capitalisation, they are mooting the idea of reinvesting in that market after the conclusion of recapitalisation exercise.
Commenting, the Group Managing Director/Chief Executive Officer, LASACO Assurance Plc, Segun Balogun, said insurers will diversify into real estate and hospitality business post-recapitalisation, as part of plans to increase returns on investment.

According to him, currently, the company’s volume of investment in real estate business is about N3.3billion, adding: “We have discovered that for companies outside Nigeria that are making good returns, it is not only via insurance that they make income, but also by what they divert or direct the money into that makes good returns for them. They diversify into some other sectors of the economy to augment the income that is being made from the insurance business.”

In the years ahead, he said, the firm would be a major player in the hospitality and the real estate industry.
 
Similarly, the Group Managing Director/Chief Executive Officer, Cornerstone Insurance Plc, Ganiyu Musa, who disclosed that the insurer had to sell its investment in the property to raise capital, added that it can still reinvest in real estate in the future as long as it remains profitable.
 
“Of course, the original intention was to hold it for the long term, but shortly after we completed it, NAICOM then came up with the recapitalisation programme, and unfortunately, one of the provisions of the exercise is that investment in properties would not be allowed as an admissible asset. So, we are now in a situation where we have invested about N4billion of our funds and the regulator is saying, ‘Oh sorry! This N4billion will not count.” “We took the big decision to sell the property, which we did at a very handsome price. And just in one swoop, it resolved many issues. We now have a significant amount of liquidity. We don’t have the headache of recapitalisation, and we have done what the regulator wants, which is to convert any property to cash,” he added.