5 out of 7 listed life insurance companies yet to meet capital mark; Possibility of bonus and huge rights for the shareholders

There are 7 listed Life Insurance Companies in Nepal Stock Exchange (NEPSE) right now. In order to strengthen the fundamentals of the company and add cushion to their risk-taking capacity, the Beema Samiti had hiked their minimum paid-up capital requirement to Rs 2 arba.

The deadline to meet the minimum requirement was on Ashad 2075. However, the deadline has gone over by almost 6 months and only 2 companies so far have been able to meet the required capital standard. The listed life insurance companies and their paid-up capital status are mentioned below:

All the companies had issued a capital plan to meet the minimum capital requirement when the directive was issued. Some companies have come through with it, some haven't and some have altered the plan. The capital plan of the 5 companies who haven't met their capital is as shown below:

Each company has three columns, where the planned value shows the plan that the companies had submitted to the Beema Samiti to meet the capital requirement. The second column shows the rate and the third column shows that actual value. The blue shaded cells indicates that the company has implemented the proposed action and the red shaded cells shows that they haven't.

As seen in the figure, the initial plan was to reach Rs 2 arba within FY 2074/75. However, none of the above 5 companies have been able to do so. However, the last two rows show that Asian Life has proposed 60% right shares, which is in SEBON's pipeline for approval. Likewise, Surya Life's 70% right issue has been already approved by SEBON and is going to be issued soon.

After these two right issues, Asian Life, National life and Nepal Life will have successfully met the minimum capital requirement. In case of Surya Life even after 70% right they will be a little shy from Rs 2 arba. Since they haven't declared the dividend and the AGM for 2074/75, they will be able to meet the minimum requirement. After that, 4 life insurance companies will be left to meet the minimum capital requirement. These companies are already past the deadline, but they still haven't proposed their plan. All of these companies haven't even conducted the AGM of FY 2074/75 yet.

Assuming that all the companies will be meeting the capital requirement through bonus and right shares in this year, their adjusted secondary market price will look like this:

ALICL will be able to meet the capital requirement after 60% right but SLICL won't. *Therefore after 70% right, it will also have to issue at least 3.94% bonus shares from the profit of 2074/75 FY.

Similalry, PLIC will have to issue 12.06% bonus shares, which they are capable of as per their financial report. After the bonus their adjusted price in NEPSE will stand at Rs 440.8 per share.

LICN, the company with the highest LTP in Life Insurance sector will need to issue 34% bonus shares. After the issuance, their price will stands at Rs 1,151.

And finally, after issuing 8% bonus and 50% right, GLICL will have to issue 110% right again to meet the capital requirement. It had been their initial plan but haven't been implemented yet.

Also read: Seven Life Insurance companies and fifteen Non-Life Insurance companies but zero AGM for FY 74/75; what are the stakeholders losing here?

Disclaimer: This study is done just to see the effect on the secondary market price of each life insurance companies after they meet the minimum requirement of Rs 2 arba. Mentioned right and bonus share is based on assumptions. Any decision taken on the basis of this research is solely responsibility of the investors itself.