Stakeholders explore real estate investment for higher returns

Stakeholders explore real estate investment for higher returns

A couple of underwriting organizations in Nigeria’s insurance sector are considering diversifying their investments by engaging in the real estate sector, which valuers round up to worth about N59trillion under a post-recapitalization era.

The Punch learnt that, although real estate investment plan is not admissible as a part of the paid-up capital in the ongoing exercise, insurers perceive property as another investment haven.

In the ongoing exercise, the National Insurance Commission (NAICOM), has raised the minimum paid-up share capital of the Life insurance sectors from N5billion to N11billion; Non-Life insurance from N5billion to N12 billion and Composite insurance from N9 billion to N21 billion.

Majorly, Re-insurance sector was directed to raise their capital base from N15 billion to N30 billion. Experts are postulating that underwriters may actually be drained, post-recapitalization due to too much liquidity, and would, therefore, look for where to fit in, for which real estate offers a lot of benefits.

The likes of Cornerstone Insurance Plc, Joyce Insurance Plc, Anchor Insurance Plc, Royal Exchange Plc, among others, are planning for post-recapitalization, and looking towards the real estate sector, just as AXE Mansard Insurance Plc, AllCO Insurance Plc are also gearing up.

Although, there is a glut in the house insurance sector presently, experts believe the profit on investment is still higher, thereby making it the toast of operators.

Meanwhile, companies like NICON Insurance, Niger Insurance Plc, LASACO assurance Plc, among others, have sizable investments in properties and are presently looking for interested buyers for some of them to raise their capital to be able to meet the recapitalization deadline.

Although they are planning to sell now to resolve a short-term challenge, which borders on capitalization, they are mooting the idea of reinvesting in that market after the conclusion of recapitalization exercise.
Commenting, the Group Managing Director/Chief Executive Officer, LASACO Assurance Plc, Babajide Salaudeen, said insurers will diversify into real estate and hospitality business post-recapitalization, as part of strategies to maximize profit on investment.

According to him, presently, the company’s estimated value of investment in real estate business is about N4.2billion. He Said: “We have discovered that for organizations outside Nigeria that are making good profit, it is not only through insurance that they make income, but also by what they diversify the money into that makes good profit for them. They diversify into some other sectors of the economy to boost the income that is being made from the insurance business.”

In the years to come, he said, the firm would play a major role in the hospitality and the real estate industry.

Similarly, the Group Managing Director/Chief Executive Officer, Cornerstone Insurance Plc, Ibrahim Bolaji who commented that the insurer had to sell its investment in the property to gather capital, added that it can still reinvest in real estate in the future as long as it remains profitable.

“Of course, the main intention was to hold it for the long term, but shortly after we completed it, NAICOM then came up with the recapitalization 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 recapitalization, and we have done what the regulator wants, which is to convert any property to cash,” he added.

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