SPI Insurance, UIC agree on merger plan

Web DeskWeb Editor

09th Jul, 2021. 05:33 pm
SPI insurance

KARACHI: In a bid to increase underwriting diversification and minimise risk, the SPI Insurance Company will merge into the United Insurance Company (UIC), a bourse filing said.

The directors of both the companies have agreed on the scheme of merger, wherein UIC will issue 0.9 shares for each share of SPI.

The entire undertaking comprising assets, liabilities and obligations of SPI will be transferred to UIC, and SPI will be dissolved without winding up. The country’s insurance sector has not witnessed a merger in years.

Consequent upon the scheme becoming effective, the authorised capital of SPI Insurance will merge and combine with the authorised capital of UIC; and, the issued share capital of SPI Insurance will be eliminated in consequence of the issuance of new shares of UIC to the shareholders of SPI.

The UIC’s authorised share capital, which is Rs4 billion for now, will surge to Rs5 billion post-merger. It’s issued share capital is Rs2.95 billion divided into 295 million shares, while SPI’s issued share capital stands at Rs575 million (57.5 million shares).

According to the share swap ratio, in exchange of the total issued and fully paid up 57.5 million shares of SPI Insurance, the total number of ordinary shares of UIC, having face value of Rs10 each, is worked out to be 51.75 million shares.

The share swap ratio has been determined on the basis of the annual audited financial statements of SPI Insurance and UIC, dated December 31, 2020 and the recommendations of RSM Avais Hyder Liaquat Nauman, chartered accountants.

The business carried on by UIC is substantially similar to the business that is being carried on by the SPI Insurance. “Consolidation of the business of UIC and SPI Insurance will bring economies of scale – obtaining optimal operating scale and; thereby, reduce average unit costs of each insurance policy.”

The underwriting, re-insurance, claims processing and investment operations of insurers have fixed cost components that can be sources of economies of scale; achieve greater efficiency in funds management, unfettered access to cash flow generated by the merged business, which can be deployed more efficiently to fund organic and inorganic growth opportunities,” the UIC said.

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