Sunday Ojeme
Still smarting from its new found position as the toast of investors in the stock market, quoted insurance companies last week maintained their streak of successes with their stocks getting the bullish edge over other conglomerates.
This is following on the trend set by the industry immediately after the conclusion of the insurance industry recapitalisation.
At the close of business on Wednesday, the volume of trading recorded by insurance stocks almost doubled the ones traded by the banks. Insurance stocks, widely considered as penny stocks, have become suddenly attractive to investors in anticipation of the future.
On the day in question, the sub-sector recorded 440.17 million shares worth N1.05bn traded in 1, 272 transactions.
Leading the pack was International Energy Insurance Plc, which traded 209.31 million shares worth N374.64m in 130 deals followed by NEM Insurance Plc, which traded 89.86 million shares worth N169.75 million in 293 transactions.
Crusader Insurance Plc sold 66.65 million shares worth N285.96m in 39 deals.
Despite the sudden interest taken by discerning investors on the fortunes of the sector, activities of the operators in the recent past have continued to dampen the enthusiasm of some stakeholders, potential investors and industry watchers.
The development has continued to generate mixed feelings because of the inability of the industry to end its consolidation that has gone on for two years, thereby putting a question mark on the integrity of the industry.
Observers believe that the clash of interests will go a long way in ridiculing the sector before the international community despite the bullish experience currently associated with some of the companies' stocks.
They contend that the current situation in the industry should not have arisen in the first place if personal interests were not allowed to override the purpose of the consolidation programme.
Prior to the current development, the insurance sector had suffered a lot of credibilty problem arising mainly from non-payment of claims or delayed payment of verified claims.
The Federal Government had thought that the early recapitalisation of the sector would instil confidence in people to take insurance covers as well as put to an end the credibility problems suffered by the industry
Just as the stakeholders are still battling to resolve the current impasse, a new dimension cropped up two weeks ago with the resolve by the former Commissioner for Insurance, Chief Emmanuel Chukwulozie, to be joined in the suit filed by the Group Managing Director of NICON Group of Companies, Mr. Jimoh Ibrahim, against the Federal Government and the National Insurance Commission.
Industry watchers believe that the decision will enable the former CFI restore his integrity as well as ensure that all the parties involved get justice at the end of the day, no matter what the court eventually decides.
Among other things, the ex-commissioner wants the court to set aside the report of the Mallam Bala Zakariya'u-led committee and also reinstate him as the CFI.
Chukwulozie also raised some questions, which bordered on the constitution and integrity of the panel.
He questioned the rationale behind making an operator in the same industry to head a panel to look into the activities of NAICOM and review an exercise that his company participated in.
According to him, "The chairman of the panel is an operator, a chairman of an insurance company. I have queried him in the past over reckless spending of pension fund. For the Finance Ministry to ask the same person to head a probe panel over the affairs of the regulator is abnormal and an abuse of due process.
"If the court finds the panel to be illegal, then I will have to be reinstated, hence my joining the plaintiffs in this matter to be on the part of justice."
Chukwulozie said his intention for being a party to the suit was for justice to be done over the manner in which he was removed from office.
Although the Federal Government and NAICOM had asked the Federal High Court to vacate the order halting the consolidation exercise, observers are still worried that Chukwulozie's renewed interest in the suit and the recent appeal to the National Assembly by Ibrahim to ensure that the rule of law was adhered to might further pose obstacles to the move by the Nigerian Insurers Association, stakeholders and some elders in the industry to find amicable solutions to the crisis.
The integrity question has always come up as the events unfolded.
Whereas some observers have criticised Ibrahim for not subjecting his companies to verification, they also picked holes in the committee’s decision to turn a blind eye on the Nigerian Agriculture Insurance Corporation currently with a shareholders’ fund of N499m
They alleged that NAIC was cleared by the committee after the minister promised that the balance of about N2.6bn would be made available in the 2008 budget.
They wondered how such a decision was arrived at when the same panel had allegedly scandalised a company like Equity Life Insurance Company Limited for merely failing to pay commission.
Commenting on the crisis, the immediate past President of the Nigerian Council of Registered Insurance Brokers, Chief Babajide Olatunde-Agbeja, said the impact of the current crisis would further scare foreign investors who were beginning to worm their way into the country's insurance establishment.
He pointed out that the development was also eroding trust and integrity, which were major factors of consideration in insurance business.
According to him, “If we stay in court, it can go on for the next two or three years and we pray that this will not disintegrate the insurance industry.
“The big boys have started insuring abroad again, they say they would defile the law rather than let their investments collapse. So there are lots of problems here that many of us are not seeing. It is the entire industry that is at stake, it can disintegrate, and it can collapse. What do we sell in insurance if not trust and integrity and in all this that is happening, where is the integrity?"
Blaming the initial grouse on the perceived crack between NICON management and the agents of the Federal Government, which is a part owner of both NICON and Nigeria Reinsurance, he said he could not blame Ibrahim for going to court to protect his interest and investments, which he did not want to lose, adding, however, that he should have equally subjected himself to verification in the first place.
He said, “The Federal Government owns 30 per cent stake in NICON Insurance Plc and 49 per cent in Nigeria Reinsurance Corporation, it is still a Federal Government baby, so why are you taking your part owners to court? Why can't you sit down and dialogue because if I were Jimoh Ibrahim, I would not be in this state because I would have dialogued with my part owners to know how to move forward."
On the way forward, Agbeja suggested that the report of the Presidential Technical Committee be implemented without doing anything about NICON and Nigeria Re until the court case was resolved.
Sunday 28 October 2007
Friday 19 October 2007
Dangote clinches CEO of the year award
Sunday Ojeme
The Chairman and Chief Executive Officer, Dangote Group, Alhaji Aliko Dangote, was on Thursday named as the 2007 CEO of the year at the Nigeria’s Most Respected Company and CEO 2007 awards.
The event, organised by BusinessDay and PricewaterHouseCooper also saw produced the Managing Director of Guarantee Trust Bank, Mr.Tayo Adenirokun, and his counterpart at Zenith Bank Plc, Mr.Jim Ovia, emerging as first and second runners up respectively.
In his keynote address, the Chairman at the event and former Nigerian High Commissioner to the United Kingdom, Dr. Christopher Kolade, advised Nigerian industrialists to imbibe the culture of integrity while carrying out their businesses.
He said he had always advocated that there must be ethics and integrity if corporate organisations in Nigeria were to become world class.
Going down memory lane, he said, “Ten years ago, we already had a convention on business integrity in Nigeria, with a view to making corporate leaders know and understand that integrity is an invaluable asset in business.”
He said as high commissioner, there were several challenges that he faced, which only served to make him more conscious of the fact that integrity in both public and private dealings was the only way that one could reach the top, saying that all the chief executives should imbibe the spirit of integrity.
Earlier in his welcome address, the Managing Director of PriceWaterhouseCoopers, Mr.Ken Igbokwe, said the awards were meant to promote accountability and discipline in corporate governance.
He said 2007 edition was the third in the series in Nigeria, and the ninth worldwide, pointing out that in the past, winners were determined differently from what obtained this year as they were chosen and decided by fellow CEOs.
In the most respected company of the year category, Guarantee Trust Bank Plc emerged the company of the year followed by Nestle Plc.
Some other nominees included the Managing Director of First Bank Plc, Mr. Jacobs Moyo Ajekigbe, the Managing Director of Oando Plc, Mr.Wale Tinubu, Chairman of Globacom Nigeria, Mr.Mike Adenuga, and the Managing Director of Intercontinental Bank Plc, Mr.Erastus Akingbola.
The event is put together annually by PriceWaterHouseCoopers and BusinessDay Newspapers to select the outstanding CEO of the year, with a view to promoting accountability and integrity in corporate governance in the business environment in Nigeria.
.
The Chairman and Chief Executive Officer, Dangote Group, Alhaji Aliko Dangote, was on Thursday named as the 2007 CEO of the year at the Nigeria’s Most Respected Company and CEO 2007 awards.
The event, organised by BusinessDay and PricewaterHouseCooper also saw produced the Managing Director of Guarantee Trust Bank, Mr.Tayo Adenirokun, and his counterpart at Zenith Bank Plc, Mr.Jim Ovia, emerging as first and second runners up respectively.
In his keynote address, the Chairman at the event and former Nigerian High Commissioner to the United Kingdom, Dr. Christopher Kolade, advised Nigerian industrialists to imbibe the culture of integrity while carrying out their businesses.
He said he had always advocated that there must be ethics and integrity if corporate organisations in Nigeria were to become world class.
Going down memory lane, he said, “Ten years ago, we already had a convention on business integrity in Nigeria, with a view to making corporate leaders know and understand that integrity is an invaluable asset in business.”
He said as high commissioner, there were several challenges that he faced, which only served to make him more conscious of the fact that integrity in both public and private dealings was the only way that one could reach the top, saying that all the chief executives should imbibe the spirit of integrity.
Earlier in his welcome address, the Managing Director of PriceWaterhouseCoopers, Mr.Ken Igbokwe, said the awards were meant to promote accountability and discipline in corporate governance.
He said 2007 edition was the third in the series in Nigeria, and the ninth worldwide, pointing out that in the past, winners were determined differently from what obtained this year as they were chosen and decided by fellow CEOs.
In the most respected company of the year category, Guarantee Trust Bank Plc emerged the company of the year followed by Nestle Plc.
Some other nominees included the Managing Director of First Bank Plc, Mr. Jacobs Moyo Ajekigbe, the Managing Director of Oando Plc, Mr.Wale Tinubu, Chairman of Globacom Nigeria, Mr.Mike Adenuga, and the Managing Director of Intercontinental Bank Plc, Mr.Erastus Akingbola.
The event is put together annually by PriceWaterHouseCoopers and BusinessDay Newspapers to select the outstanding CEO of the year, with a view to promoting accountability and integrity in corporate governance in the business environment in Nigeria.
.
Thursday 18 October 2007
Recapitalisation: Insurance elders meet to resolve legal disputes
Sunday Ojeme
Elders in the insurance industry will be meeting on Thursday (today) to deliberate on the current impasse in the industry as a result of the court injunction putting a halt to the ongoing recapitalisation programme.Disclosing this on Wednesday in Aba, Abia State, the President, Chartered Insurance Institute of Nigeria, Mr. Adeyemo Adejumo, said the meeting became necessary in order to resolve the issue amicably.Speaking to journalists at the National Insurance Conference being organised by the Nigerian Council of Registered Insurance Brokers in Aba, he said the conflict in the industry was not an indication that the practictioners did not welcome investors, saying that everything would, however, turn out better at the end of after the meeting of the elders.In his presentation at the event, the former President, Nigerian Institute of Management, Chief Lugard Aimiuwu, called on insurance operators to be abreast with globalisation in order to survive the attendant challenges common with consolidation.He said some stimulation was necessary at gestation stages of industry growth, which must increasingly yield to market forces to reduce avoidable trauma and allow steady access to abundant opportunities in a systemic manner.He said the evidence on ground was a mix bag but that the most challenging image included unhealthy, sometimes cut-throat jostling for positions in merged entities, which could only have one head at the top, squabbles over composition of new board, over-layered and under-spanned organisational architecture and structure as well as winner-take-all, loser spoil-all syndrome.According to him, "The resultant management challenges include having a competent and visionary leader as champion of change, while avoiding the sun-god syndrome, then developing appropriate marketing and customer strategies to address the new frocious scramble for market shares and attaining target performance under the new ferocious market pressure without compromising corporate governance and best practice."In the paper, titled, "Insurance Industry Consolidation - A Futuristic Perspective," he said any organisation that did not have a system or mechanism for recognising and tracking change, plus identifying and monitoring patterns and trends, was seriously endangered. Adejumo, who delivered the keynote address, said with the recapitalisation and consolidation, the industry could not and should not afford to relegate human capital development to the background.He said the successive leadership of the NCRIB had, undoubtedly brought the vast experience to bear in advancing the course of the brokers and ensuring that practitioners operated within the ambit of the guidelines and the enabling law."Topmost on the priorities of our profession is the need for all practitioners to embrace corporate governance ideas and codes of best practice. As insurance brokers, you are part and parcel of our collective quest to make our profession the pride of all," he said.Earlier in his welcome address, the outgoing president, NCRIB, Chief Babatunde Olatunde Agbeja, said a good number of the insurance companies were already driving home aggressive expansionist vision, leading them to have operational activities in the West African sub region and even beyond.He said, "All these would not have been possible with the small, fragmented nature of most of the companies some few years ago. It is unwise for the insurance industry to get itself squeezed into a small mold under any guise."
Elders in the insurance industry will be meeting on Thursday (today) to deliberate on the current impasse in the industry as a result of the court injunction putting a halt to the ongoing recapitalisation programme.Disclosing this on Wednesday in Aba, Abia State, the President, Chartered Insurance Institute of Nigeria, Mr. Adeyemo Adejumo, said the meeting became necessary in order to resolve the issue amicably.Speaking to journalists at the National Insurance Conference being organised by the Nigerian Council of Registered Insurance Brokers in Aba, he said the conflict in the industry was not an indication that the practictioners did not welcome investors, saying that everything would, however, turn out better at the end of after the meeting of the elders.In his presentation at the event, the former President, Nigerian Institute of Management, Chief Lugard Aimiuwu, called on insurance operators to be abreast with globalisation in order to survive the attendant challenges common with consolidation.He said some stimulation was necessary at gestation stages of industry growth, which must increasingly yield to market forces to reduce avoidable trauma and allow steady access to abundant opportunities in a systemic manner.He said the evidence on ground was a mix bag but that the most challenging image included unhealthy, sometimes cut-throat jostling for positions in merged entities, which could only have one head at the top, squabbles over composition of new board, over-layered and under-spanned organisational architecture and structure as well as winner-take-all, loser spoil-all syndrome.According to him, "The resultant management challenges include having a competent and visionary leader as champion of change, while avoiding the sun-god syndrome, then developing appropriate marketing and customer strategies to address the new frocious scramble for market shares and attaining target performance under the new ferocious market pressure without compromising corporate governance and best practice."In the paper, titled, "Insurance Industry Consolidation - A Futuristic Perspective," he said any organisation that did not have a system or mechanism for recognising and tracking change, plus identifying and monitoring patterns and trends, was seriously endangered. Adejumo, who delivered the keynote address, said with the recapitalisation and consolidation, the industry could not and should not afford to relegate human capital development to the background.He said the successive leadership of the NCRIB had, undoubtedly brought the vast experience to bear in advancing the course of the brokers and ensuring that practitioners operated within the ambit of the guidelines and the enabling law."Topmost on the priorities of our profession is the need for all practitioners to embrace corporate governance ideas and codes of best practice. As insurance brokers, you are part and parcel of our collective quest to make our profession the pride of all," he said.Earlier in his welcome address, the outgoing president, NCRIB, Chief Babatunde Olatunde Agbeja, said a good number of the insurance companies were already driving home aggressive expansionist vision, leading them to have operational activities in the West African sub region and even beyond.He said, "All these would not have been possible with the small, fragmented nature of most of the companies some few years ago. It is unwise for the insurance industry to get itself squeezed into a small mold under any guise."
Saturday 13 October 2007
CBN tasks NAIC on micro credit
The Central Bank of Nigeria has tasked the management of the Nigerian Agricultural Insurance Corporation to go the extra mile by adopting the CBN micro-credit policy initiative with a view to breaking new grounds and meeting other needs of the populace in the areas of micro-financing and micro-insurance, according to a statement on Friday.
Speaking at an interactive session with members of the African Rural and Agricultural Credit Association, Mr. Boma Benebo of the Development Finance Department of the CBN, commended NAIC for its success in the unique agriculture insurance business since its establishment 20 years ago.
He advised NAIC to factor into the new micro-credit drive with a view to diversifying its operations and also strengthening its bottom line in the competitive insurance business.
He reiterated the need for NAIC to reach out to more stakeholders in the agric business, particularly the multinational corporations in large scale agriculture businesses, saying the Corporation had .a huge potential to succeed in its statutory mandate to serve as a catalyst towards boosting agricultural business and food security in the country.
Responding, the Managing Director of NAIC, Mr. K.K Yusuf, who was represented by the Corporation's Executive Director of Operations, Mr. Yemi Akinyemi, commended the intervention and support of the CBN through its Agricultural Credit Guarantee Scheme, saying the
ACGS mandatory directive to commercial banks to obtain NAIC cover for their agric loan facilities had greatly benefited NAIC and therefore kept the Corporation alive to its statutory responsibility to its clients, the farmers.
He further explained that NAIC is a key agency that compliments other government initiatives towards achieving food security and the attainment of poverty reduction among the farming populace, saying the Corporation was an indispensable tool in Nigeria's efforts at attaining acceptable level of development in the promising agric sector of the economy.
He added that the ACGS intervention had succeeded in minimizing the effects of production risk, while recovery of loans had improved tremendously. He revealed that NAIC had to venture into the general insurance business as permitted by NAICOM for the purpose of diversifying its service delivery to the public.
He said NAIC was committed to adopting the principle of corporate governance towards ensuring that public confidence was realised and sustained in its drive to provide different insurance services in the country.
He also assured that NAIC was available to collaborate with other agencies whose desire was to boost food security and alleviate poverty in the country.
Meanwhile, NAIC has finalised arrangements to partner with All Farmers Association of Nigeria to sensitise and equip farmers on modern management practices.
NAIC in a statement said that members of AFAN engaged NAIC officials in an interactive session during which the partnership was agreed.
The statement, signed by Head, Corporate Affairs, NAIC, Mr Butrous Pembi, said modern management practices would help improve farmers’ yield and reduce the effect of natural disasters.
The Executive Director, NAIC, Mr. Bappa Toro, said farmers needed to be adequately educated on how to minimise losses in the event of flood, drought and pest infection.
He said that the statutory mandate of NAIC was to indemnify farmers who insured their farms with the corporation and to compensate or offer relief to those who did not partronise it.
The acting national president of AFAN, Mr. Femi Coker, lamented the spate of flood and devastation of farmlands across the country and welcomed the NAIC initiative to organise sensitisation campaigns and agricultural extension services in collaboration with AFAN.
He further expressed fear that food security could be threatened if stakeholders did not work out intervention energy in the agro-allied business.
AIICO General adopts more growth strategies
Aiico General Insurance Company Limited has reiterated its resolve to be outstanding in the general business.
In a statement on Saturday, the organisation said it had concluded plans to take the insurance market by storm, having concluded plans to start unfolding exciting value-added products and packages that would delight customers.
The statement said with the successful conclusion of its internal policies and processes, in line with global best practice and standards, the company was now poised to improve significantly the delivery of qualitative service to its customers in line with its mission statement of continuing to protect wealth through superior risk management capabilities, whilst continuously exceeding stakeholders’ expectations.
According to the statement, “The Management of this organisation leverages on market experience and professionalism, whilst leading a team of dedicated, highly efficient and well motivated staff. It has also deployed a robust information technology platform to drive its processes. The company has a wide and functional distributive channel, with branch offices in all the major cities of the country; it is market-driven, better-focused, less bureaucratic, more flexible, faster, flatter and client-connected.”
The statement said the impact of all the reforms was already being felt in the market, with comments from clients and customers alike in the area of improved and qualitative service delivery.
CINN president advises operators on professionalism
THE President of the Chartered Insurance Institute of Nigeria, Mr. Adeyemo Adejumo, has called for professionalism in the management of insurance businesses in the country.
In a statement made available to our correspondent on Saturday, he said the failure of any organisation to keep abreast with trends of innovations in any form of business transactions might not be unconnected with the quality and quantity of both human and capital resources at its disposal.
According to him, "It is our belief that with the enormous funds now at the disposal of most insurance companies, which is as a result of the recapitalisation exercise, serious attentions would now be given to improving operational activities of these insurance companies for the betterment of our society in general."
He said the industry could complete favourably with other insurers elsewhere in the global market because of the recent recapitalisation exercise in the financial sectors, adding that the industry could now settle claims as at when due. He pointed out that improved training facilities could now be extended to their members and that the country would be better for it.
He said, "I charge you members of ORC as good ambassadors of our great profession to exhibit that habit of utmost good faith in both dealing with ourselves and members of the public, so that the trend of this new found rising profile of the industry would be sustained.
"It is pertinent to highlight here that with this improved and rising profile of our great industry, professionalism should not be thrown to the blinds. The public is watching and may not hesitate to condemn us where we go contrary to their expectations in transacting our business. It is however, my advice that you will not rest on your oars, you will press forward until you attain that height that can only be surpassed by angels."
He enjoined them to be more tenacious in discharging their official duties so as to live credible marks on the sand of times.
The Chairman of the committee, CIIN, Mr. Ademola Bukola, charged all insurance companies to work toward increasing their shareholders’ fund to the tune of N20bn in the next five years, without waiting for the government to do so.
According to him, "If the insurance companies can build a large stock capacity, they can be rated among the mega companies in the world, hence, we need to sit down to examine and fine tune solutions to correct our mistakes and imbalances."
Sovereign Trust Insurance pays N260m claims
Sovereign Trust Insurance Plc has paid claims worth N260m by the end of August. This was up from the N181m paid in the corresponding period of 2006 representing an increase of 43.65 per cent.
In a statement on Friday, the Managing Director of the company, Mr. Seun Ajayi, said STI was poised to meet its obligations as at when due and would not disappoint its customers and other stakeholders.
This announcement from Sovereign Trust Insurance Plc, which is one of the companies to have successfully recapitalised, is coming on the heels of the restructuring exercise embarked upon by the company to help it focus more stringently on meeting the needs of its numerous customers.
The National Insurance Commission has inaugurated an initiative that is focused on alleviating the problems encountered by policyholders with a directive to insurers to ensure prompt payment of claims.
Speaking on the same development, the Executive Director Operations, Mr Wale Onaolapo, said, “What we are doing is very much in line with the objectives of the industry regulators. The underlying thing is the well being of our customers, both individuals and corporate. Our commitment to this is unambiguous.”
Currently, STI has an authorised share capital of N3.5bn with a fully paid-up capital of over N2bn.
C/River names marketer for Calabar music festival
The Cross River State Governor, Mr. Lyel Imoke, has appointed Advertange Entertainment as the markete for the maiden edition of the 2007 Lake Side music concert coming up in Calabar
The acting Managing Director, Cross River State Tourism Bureau, Mr. Nzan Ogbe, in a statement on Friday, said the fiesta which will form part of activities lined up for this year’s annual Christmas festival would be held in conjunction with the state tourism board.
The statement said the music fiesta was motivated by the need to creatively boost the yearly street carnival that had attracted over three million visitors and tourists both from within and outside Nigeria to the state.
The parade, made popular by the former governor of the state, Mr. Donald Duk, has been identified as a major tourist attraction for holidaymakers by the current government, which is set to boost crowd attendance through the concert idea.
The statement said by the appointment, Advertange Entertainment, a subsidiary of Advertange Limited, would liaise with the Cross River State Christmas Festival Sub Committee in charge of marketing to source for sponsorship for the event.
The Lakeside Music Fiesta is also intended to showcase most of Nigeria ’s talented artistes as a way of promoting the country’s entertainment industry.
Meanwhile, Advertange Entertainment has called on corporate organisations and brand owners to cash in on the opportunities provided by the concert scheduled to hold in December.
Advertange, in a statement, said the sponsorship of the event by prospective brand owners and organisations would enable such sponsors latch into the marketing opportunities of the fiesta which would attract over five million tourists and holiday makers.
Ogbe said sponsors would get value for their money as Calabar remained the first tourist destination in Nigeria because it symbolised the image of a new Nigeria in the international community.
The Managing Director of Advertange Limited, Mr Akin Adelegan, said his company went into the deal as a way of demonstrating support for showcasing the rich, tourist potential of the state to the outside world while also promoting the entertainment industry in Nigeria .
Speaking at an interactive session with members of the African Rural and Agricultural Credit Association, Mr. Boma Benebo of the Development Finance Department of the CBN, commended NAIC for its success in the unique agriculture insurance business since its establishment 20 years ago.
He advised NAIC to factor into the new micro-credit drive with a view to diversifying its operations and also strengthening its bottom line in the competitive insurance business.
He reiterated the need for NAIC to reach out to more stakeholders in the agric business, particularly the multinational corporations in large scale agriculture businesses, saying the Corporation had .a huge potential to succeed in its statutory mandate to serve as a catalyst towards boosting agricultural business and food security in the country.
Responding, the Managing Director of NAIC, Mr. K.K Yusuf, who was represented by the Corporation's Executive Director of Operations, Mr. Yemi Akinyemi, commended the intervention and support of the CBN through its Agricultural Credit Guarantee Scheme, saying the
ACGS mandatory directive to commercial banks to obtain NAIC cover for their agric loan facilities had greatly benefited NAIC and therefore kept the Corporation alive to its statutory responsibility to its clients, the farmers.
He further explained that NAIC is a key agency that compliments other government initiatives towards achieving food security and the attainment of poverty reduction among the farming populace, saying the Corporation was an indispensable tool in Nigeria's efforts at attaining acceptable level of development in the promising agric sector of the economy.
He added that the ACGS intervention had succeeded in minimizing the effects of production risk, while recovery of loans had improved tremendously. He revealed that NAIC had to venture into the general insurance business as permitted by NAICOM for the purpose of diversifying its service delivery to the public.
He said NAIC was committed to adopting the principle of corporate governance towards ensuring that public confidence was realised and sustained in its drive to provide different insurance services in the country.
He also assured that NAIC was available to collaborate with other agencies whose desire was to boost food security and alleviate poverty in the country.
Meanwhile, NAIC has finalised arrangements to partner with All Farmers Association of Nigeria to sensitise and equip farmers on modern management practices.
NAIC in a statement said that members of AFAN engaged NAIC officials in an interactive session during which the partnership was agreed.
The statement, signed by Head, Corporate Affairs, NAIC, Mr Butrous Pembi, said modern management practices would help improve farmers’ yield and reduce the effect of natural disasters.
The Executive Director, NAIC, Mr. Bappa Toro, said farmers needed to be adequately educated on how to minimise losses in the event of flood, drought and pest infection.
He said that the statutory mandate of NAIC was to indemnify farmers who insured their farms with the corporation and to compensate or offer relief to those who did not partronise it.
The acting national president of AFAN, Mr. Femi Coker, lamented the spate of flood and devastation of farmlands across the country and welcomed the NAIC initiative to organise sensitisation campaigns and agricultural extension services in collaboration with AFAN.
He further expressed fear that food security could be threatened if stakeholders did not work out intervention energy in the agro-allied business.
AIICO General adopts more growth strategies
Aiico General Insurance Company Limited has reiterated its resolve to be outstanding in the general business.
In a statement on Saturday, the organisation said it had concluded plans to take the insurance market by storm, having concluded plans to start unfolding exciting value-added products and packages that would delight customers.
The statement said with the successful conclusion of its internal policies and processes, in line with global best practice and standards, the company was now poised to improve significantly the delivery of qualitative service to its customers in line with its mission statement of continuing to protect wealth through superior risk management capabilities, whilst continuously exceeding stakeholders’ expectations.
According to the statement, “The Management of this organisation leverages on market experience and professionalism, whilst leading a team of dedicated, highly efficient and well motivated staff. It has also deployed a robust information technology platform to drive its processes. The company has a wide and functional distributive channel, with branch offices in all the major cities of the country; it is market-driven, better-focused, less bureaucratic, more flexible, faster, flatter and client-connected.”
The statement said the impact of all the reforms was already being felt in the market, with comments from clients and customers alike in the area of improved and qualitative service delivery.
CINN president advises operators on professionalism
THE President of the Chartered Insurance Institute of Nigeria, Mr. Adeyemo Adejumo, has called for professionalism in the management of insurance businesses in the country.
In a statement made available to our correspondent on Saturday, he said the failure of any organisation to keep abreast with trends of innovations in any form of business transactions might not be unconnected with the quality and quantity of both human and capital resources at its disposal.
According to him, "It is our belief that with the enormous funds now at the disposal of most insurance companies, which is as a result of the recapitalisation exercise, serious attentions would now be given to improving operational activities of these insurance companies for the betterment of our society in general."
He said the industry could complete favourably with other insurers elsewhere in the global market because of the recent recapitalisation exercise in the financial sectors, adding that the industry could now settle claims as at when due. He pointed out that improved training facilities could now be extended to their members and that the country would be better for it.
He said, "I charge you members of ORC as good ambassadors of our great profession to exhibit that habit of utmost good faith in both dealing with ourselves and members of the public, so that the trend of this new found rising profile of the industry would be sustained.
"It is pertinent to highlight here that with this improved and rising profile of our great industry, professionalism should not be thrown to the blinds. The public is watching and may not hesitate to condemn us where we go contrary to their expectations in transacting our business. It is however, my advice that you will not rest on your oars, you will press forward until you attain that height that can only be surpassed by angels."
He enjoined them to be more tenacious in discharging their official duties so as to live credible marks on the sand of times.
The Chairman of the committee, CIIN, Mr. Ademola Bukola, charged all insurance companies to work toward increasing their shareholders’ fund to the tune of N20bn in the next five years, without waiting for the government to do so.
According to him, "If the insurance companies can build a large stock capacity, they can be rated among the mega companies in the world, hence, we need to sit down to examine and fine tune solutions to correct our mistakes and imbalances."
Sovereign Trust Insurance pays N260m claims
Sovereign Trust Insurance Plc has paid claims worth N260m by the end of August. This was up from the N181m paid in the corresponding period of 2006 representing an increase of 43.65 per cent.
In a statement on Friday, the Managing Director of the company, Mr. Seun Ajayi, said STI was poised to meet its obligations as at when due and would not disappoint its customers and other stakeholders.
This announcement from Sovereign Trust Insurance Plc, which is one of the companies to have successfully recapitalised, is coming on the heels of the restructuring exercise embarked upon by the company to help it focus more stringently on meeting the needs of its numerous customers.
The National Insurance Commission has inaugurated an initiative that is focused on alleviating the problems encountered by policyholders with a directive to insurers to ensure prompt payment of claims.
Speaking on the same development, the Executive Director Operations, Mr Wale Onaolapo, said, “What we are doing is very much in line with the objectives of the industry regulators. The underlying thing is the well being of our customers, both individuals and corporate. Our commitment to this is unambiguous.”
Currently, STI has an authorised share capital of N3.5bn with a fully paid-up capital of over N2bn.
C/River names marketer for Calabar music festival
The Cross River State Governor, Mr. Lyel Imoke, has appointed Advertange Entertainment as the markete for the maiden edition of the 2007 Lake Side music concert coming up in Calabar
The acting Managing Director, Cross River State Tourism Bureau, Mr. Nzan Ogbe, in a statement on Friday, said the fiesta which will form part of activities lined up for this year’s annual Christmas festival would be held in conjunction with the state tourism board.
The statement said the music fiesta was motivated by the need to creatively boost the yearly street carnival that had attracted over three million visitors and tourists both from within and outside Nigeria to the state.
The parade, made popular by the former governor of the state, Mr. Donald Duk, has been identified as a major tourist attraction for holidaymakers by the current government, which is set to boost crowd attendance through the concert idea.
The statement said by the appointment, Advertange Entertainment, a subsidiary of Advertange Limited, would liaise with the Cross River State Christmas Festival Sub Committee in charge of marketing to source for sponsorship for the event.
The Lakeside Music Fiesta is also intended to showcase most of Nigeria ’s talented artistes as a way of promoting the country’s entertainment industry.
Meanwhile, Advertange Entertainment has called on corporate organisations and brand owners to cash in on the opportunities provided by the concert scheduled to hold in December.
Advertange, in a statement, said the sponsorship of the event by prospective brand owners and organisations would enable such sponsors latch into the marketing opportunities of the fiesta which would attract over five million tourists and holiday makers.
Ogbe said sponsors would get value for their money as Calabar remained the first tourist destination in Nigeria because it symbolised the image of a new Nigeria in the international community.
The Managing Director of Advertange Limited, Mr Akin Adelegan, said his company went into the deal as a way of demonstrating support for showcasing the rich, tourist potential of the state to the outside world while also promoting the entertainment industry in Nigeria .
Recapitalisation: NIA moves to settle legal tango
Recapitalisation: NIA moves to settle legal tango
Sunday Ojeme
In one of his contributions to assist in the growth of the insurance industry, the Managing Director of Intercontinental Bank Plc, Mr. Erastus Akingbola, said one of the greatest achievements of the recapitalisation programme was that power had changed hands from the previously perceived owners of the companies (that is, managers), to the real owners-the shareholders-especially with the expected listing of the recapitalised insurance companies on the stock exchange.
He said, as the shareholders of the recapitalised banks had become increasingly aware, shareholder activism held the key to better corporate governance and management.
Akingbola spoke on the need to protect the various investors who had considered it worthwhile to invest in an industry that had suddenly become forward looking as a result of a boost in the shareholders’ funds.
However, happenings in the last two weeks over the court injunction secured by NICON Insurance Plc and A & G Insurance Plc have been unsettling some investors in the serctor, who came into the system through the opportunities the consolidation programme offered.
The development is already weighing on the Nigerian Insurers Association, which seeking quick resolution to the matter.
The applicants had gone to the Federal High Court in Abuja to seek an order stopping the ongoing recapitalisation in the sector as a result of perceived illegalities. Justice Anwuri Chikere, who also ordered the Natioanl Insurance Commission to stop other processes relating to the exercise, granted them the order.
Our correspondent’s findings revealed that a few weeks ago, a chief executive officer in one of the insurance companies that recently sealed a merger agreement with a Nigerian firm had made preparations to travel to his country on vacation before the court gave the order.
As soon as the news broke, he cancelled his trip and headed for the NIA’s office in Lagos to confirm the development and the likely implication of the court order on the industry.
His fears, according to a source who confided in our correspondent, bordered on what to tell investors in the merger deal on getting back to his country. The news, which had already gotten to his country, was said to have prompted several telephone calls from stakeholders who wanted to know how and when the matter would be resolved.
This scenario has been the same even with local investors who are demanding urgent resolution to the empasse before the sector would lose the investment steam, which it had been enjoying at the stock market.
In the last two weeks since the order was granted, listed insurance companies that were part of the leading firms at the stock exchange are beginning to experience a dip in transaction.
Apart from the money raised locally, the recapitalisation campaign also provided opportunities for foreign investors to put funds into the Nigerian economy, which had been marked for years as fraudulent because of scam mails that emanate from the country.
As part of the push, Capital Alliance Private Equity Limited emerged as core investor in Cornerstone Insurance Plc after injecting N3.4bn ($26 million) into the underwriting firm.
Capital Alliance has links with the renowned African Capital Alliance.
Private equity fund manager, EMP Africa, invested $46.5m (about N6bn) in Continental Reinsurance Plc as well as additional $4m from three other foreign investors, RP capital Group, Genesis Emerging Market Fund and South African Investec Asset Management while the International Finance Corporation, an arm of the World Bank, invested $14m in Leadway Assurance Company Limited. United State’s biggest insurer, American International Group, also took interest in the system but failed to make any financial commitment.
Chief Timothy Adesiyan of Nigerian Shareholders Solidarity Association among others, urged the new investors to bring to bear their expertise, international reach wealth of experience and financial power by way of enhancing shareholder's value.
The Co-ordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, expressed confidence and attested to the ethical pedigree of the new investors. He, however, urged them not to do anything that would jeopardise the interest of shareholders.
“We want you to add value as you have done in all companies you have substantial investment stake and make appreciable returns on investments for those who have invested."
The recapitalisation programme also attracted local investors, especially within the middle and lower classes who invested their monies in the shares of the companies considered as penny stocks. They got the encouragement from experienced shareholders who never anticipated that the current impasse arising from the trapped funds, verification exercise and the current court order would confront the operators.
Believing that investors in the sector will reap their dividends quickly, the Managing Director of Star Insurance Brokers Limited, Mr. E.C .M Akamobi, said those who believed that the stocks in the industry were penny stocks would have themselves to blame by the time full consummation of the consolidation exercise was achieved.
He said prior to the consolidation era, insurance stocks were not noticed and that with the experience of the banking industry, the insurance stocks were bound to fly to high heights that would put the pessimists into a position of regrets.
Speaking in the same vein, the Chairman, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said that the wave of share appreciation had shifted to the insurance stocks. He said it was no longer in doubt that insurance stocks were rewarding investors.
According to him, "I can tell you that many millionaires are made through insurance stocks more than in banking stocks. He said the most important aspect of one of the activity charts was that apart from the banking industry, the only sector that made the ten most active stocks came from the insurance sector.”
This was the belief of some observers who thought that soon insurance companies would begin to make arrangements to own banks just the way it is in developed economy.
According to an Estate Developer, Chief Olatunde Moruf, the situation calls to question the integrity of those in the industry from the regulatory agency, the National Insurance Commission, to the operators.
Moruf, who said he suddenly took interest in buying insurance stocks during the recapitalisation programme, noted that the experience he had during the banking consolidation compelled him to invest about N800,000 in different company stocks.
Expressing his fears, he said, “When they failed to release the recapitalisation list I was worried not knowing that a bigger problem was rearing its head. Even the money that is locked up in the bank is yet another problem. The question now is when will the trapped money be released?”
He blamed those who handled the recapitalisation programme for leaving loopholes for the aggrieved operators to latch on, saying that the banking consolidation was done in way that the grievances of a few bank operators did not affect the industry as a whole.
Observers are equally wondering about other long effect of the inconclusive programme as the situation has continued to erode investors’ confidence, especially as nobody has spoken about specific interest rate on the trapped funds contrary to the expectation of the investors.
In the current circumstance, a company that raised about N3bn fresh funds will be in jeopardy as it would have placed about N2.8bn in the escrow account and another N300m as statutory deposit.
This is more appalling as the Securities and Exchange Commission has mandated the operators to pay dividends.
Another disturbing development is the resolve by multinationals to continue to place their risks offshore, with Ghana likely to be the beneficiary while some insurance brokers are withholding the premium collected on behalf of the insurers pending the release of the recapitalised list to the public.
An operator who spoke on the condition of anonymity said apart from the fact that it was becoming very difficult to collect premium from clients because of the empasse, the insurance brokers were exploiting the situation in placing their businesses in the market, while the investors are putting a lot of pressure on the insurance companies on their investments.
According to him, "I feel very sad for the insurance industry because when the bankers went through their consolidation exercise, they did not face this kind of problem, and honestly, they are exploiting the gains of the recapitalisation exercise in the sector to the full. "The most interesting part of the bankers' exercise is that many of the banks on their own are again raising their capital base far in excess of the minimum amount prescribed by Central Bank of Nigeria guideline. They are making waver in the financial service sector with their impressive financial performance as well good dividend pay out. We are hoping that this problem will be resolved quickly so that we can face the challenges of the new business environment."
Sunday Ojeme
In one of his contributions to assist in the growth of the insurance industry, the Managing Director of Intercontinental Bank Plc, Mr. Erastus Akingbola, said one of the greatest achievements of the recapitalisation programme was that power had changed hands from the previously perceived owners of the companies (that is, managers), to the real owners-the shareholders-especially with the expected listing of the recapitalised insurance companies on the stock exchange.
He said, as the shareholders of the recapitalised banks had become increasingly aware, shareholder activism held the key to better corporate governance and management.
Akingbola spoke on the need to protect the various investors who had considered it worthwhile to invest in an industry that had suddenly become forward looking as a result of a boost in the shareholders’ funds.
However, happenings in the last two weeks over the court injunction secured by NICON Insurance Plc and A & G Insurance Plc have been unsettling some investors in the serctor, who came into the system through the opportunities the consolidation programme offered.
The development is already weighing on the Nigerian Insurers Association, which seeking quick resolution to the matter.
The applicants had gone to the Federal High Court in Abuja to seek an order stopping the ongoing recapitalisation in the sector as a result of perceived illegalities. Justice Anwuri Chikere, who also ordered the Natioanl Insurance Commission to stop other processes relating to the exercise, granted them the order.
Our correspondent’s findings revealed that a few weeks ago, a chief executive officer in one of the insurance companies that recently sealed a merger agreement with a Nigerian firm had made preparations to travel to his country on vacation before the court gave the order.
As soon as the news broke, he cancelled his trip and headed for the NIA’s office in Lagos to confirm the development and the likely implication of the court order on the industry.
His fears, according to a source who confided in our correspondent, bordered on what to tell investors in the merger deal on getting back to his country. The news, which had already gotten to his country, was said to have prompted several telephone calls from stakeholders who wanted to know how and when the matter would be resolved.
This scenario has been the same even with local investors who are demanding urgent resolution to the empasse before the sector would lose the investment steam, which it had been enjoying at the stock market.
In the last two weeks since the order was granted, listed insurance companies that were part of the leading firms at the stock exchange are beginning to experience a dip in transaction.
Apart from the money raised locally, the recapitalisation campaign also provided opportunities for foreign investors to put funds into the Nigerian economy, which had been marked for years as fraudulent because of scam mails that emanate from the country.
As part of the push, Capital Alliance Private Equity Limited emerged as core investor in Cornerstone Insurance Plc after injecting N3.4bn ($26 million) into the underwriting firm.
Capital Alliance has links with the renowned African Capital Alliance.
Private equity fund manager, EMP Africa, invested $46.5m (about N6bn) in Continental Reinsurance Plc as well as additional $4m from three other foreign investors, RP capital Group, Genesis Emerging Market Fund and South African Investec Asset Management while the International Finance Corporation, an arm of the World Bank, invested $14m in Leadway Assurance Company Limited. United State’s biggest insurer, American International Group, also took interest in the system but failed to make any financial commitment.
Chief Timothy Adesiyan of Nigerian Shareholders Solidarity Association among others, urged the new investors to bring to bear their expertise, international reach wealth of experience and financial power by way of enhancing shareholder's value.
The Co-ordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, expressed confidence and attested to the ethical pedigree of the new investors. He, however, urged them not to do anything that would jeopardise the interest of shareholders.
“We want you to add value as you have done in all companies you have substantial investment stake and make appreciable returns on investments for those who have invested."
The recapitalisation programme also attracted local investors, especially within the middle and lower classes who invested their monies in the shares of the companies considered as penny stocks. They got the encouragement from experienced shareholders who never anticipated that the current impasse arising from the trapped funds, verification exercise and the current court order would confront the operators.
Believing that investors in the sector will reap their dividends quickly, the Managing Director of Star Insurance Brokers Limited, Mr. E.C .M Akamobi, said those who believed that the stocks in the industry were penny stocks would have themselves to blame by the time full consummation of the consolidation exercise was achieved.
He said prior to the consolidation era, insurance stocks were not noticed and that with the experience of the banking industry, the insurance stocks were bound to fly to high heights that would put the pessimists into a position of regrets.
Speaking in the same vein, the Chairman, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said that the wave of share appreciation had shifted to the insurance stocks. He said it was no longer in doubt that insurance stocks were rewarding investors.
According to him, "I can tell you that many millionaires are made through insurance stocks more than in banking stocks. He said the most important aspect of one of the activity charts was that apart from the banking industry, the only sector that made the ten most active stocks came from the insurance sector.”
This was the belief of some observers who thought that soon insurance companies would begin to make arrangements to own banks just the way it is in developed economy.
According to an Estate Developer, Chief Olatunde Moruf, the situation calls to question the integrity of those in the industry from the regulatory agency, the National Insurance Commission, to the operators.
Moruf, who said he suddenly took interest in buying insurance stocks during the recapitalisation programme, noted that the experience he had during the banking consolidation compelled him to invest about N800,000 in different company stocks.
Expressing his fears, he said, “When they failed to release the recapitalisation list I was worried not knowing that a bigger problem was rearing its head. Even the money that is locked up in the bank is yet another problem. The question now is when will the trapped money be released?”
He blamed those who handled the recapitalisation programme for leaving loopholes for the aggrieved operators to latch on, saying that the banking consolidation was done in way that the grievances of a few bank operators did not affect the industry as a whole.
Observers are equally wondering about other long effect of the inconclusive programme as the situation has continued to erode investors’ confidence, especially as nobody has spoken about specific interest rate on the trapped funds contrary to the expectation of the investors.
In the current circumstance, a company that raised about N3bn fresh funds will be in jeopardy as it would have placed about N2.8bn in the escrow account and another N300m as statutory deposit.
This is more appalling as the Securities and Exchange Commission has mandated the operators to pay dividends.
Another disturbing development is the resolve by multinationals to continue to place their risks offshore, with Ghana likely to be the beneficiary while some insurance brokers are withholding the premium collected on behalf of the insurers pending the release of the recapitalised list to the public.
An operator who spoke on the condition of anonymity said apart from the fact that it was becoming very difficult to collect premium from clients because of the empasse, the insurance brokers were exploiting the situation in placing their businesses in the market, while the investors are putting a lot of pressure on the insurance companies on their investments.
According to him, "I feel very sad for the insurance industry because when the bankers went through their consolidation exercise, they did not face this kind of problem, and honestly, they are exploiting the gains of the recapitalisation exercise in the sector to the full. "The most interesting part of the bankers' exercise is that many of the banks on their own are again raising their capital base far in excess of the minimum amount prescribed by Central Bank of Nigeria guideline. They are making waver in the financial service sector with their impressive financial performance as well good dividend pay out. We are hoping that this problem will be resolved quickly so that we can face the challenges of the new business environment."
Monday 8 October 2007
How court pronouncement will rattle industry
How court pronouncement will rattle industry
By Sunday Ojeme
The gradual ascension of the insurance industry in Nigeria to global relevance witnessed a turn on Thursday when a Federal High Court sitting in Abuja put a stop to the ongoing recapitalisation programme.
NICON Insurance Plc and Alliance & General Insurance Plc had gone to the court to challenge the exercise based on perceived illegality.
The pronouncement of the court, according to observers, has drawn back the hands of the clock in an industry was compelled to put its house in order and become relevant and competitive among its peers across the world.
Going by the intrigues and personal interests that characterised the review of the recapitalisation programme, industry watchers had long predicted the current development.
Prior to the court pronouncement, the operators had been thrown into confusion over the inability of the National Insurance Commission to release the list of the verified companies.
While the Commissioner for Insurance, Mr. Fola Daniel, had promised at one of his official outings, that the list would be out in a matter of days, findings by our correspondent last week revealed that the Ministry of Finance was yet to finalise work on the report submitted by a technical committee set up to review the recapitalisation programme.
The release of the list and that of the N170bn held in an escrow account with the Central Bank of Nigeria had been the problem plaguing the sector before last week’s bombshell which had been anticipated by keen observers who had predicted that more legal battles awaited the regulators.
True to their prediction, Justice Anwuri Chikere of the Federal High Court on Thursday issued an interim order restraining the Federal Government from further recapitalising and consolidating the insurance sector as well as barring the Attorney-General of the Federation and the Minister of Finance from implementing the report and recommendations of the Presidential Committee on Insurance Capitalisation set up by a former Minister of Finance, Mrs. Nenadi Usman.
NICON, through its counsel, told the court that part of the committee’s report recommended that the Federal Government should review the privatisation of NICON Insurance.
Counsel to the applicants, Mr. Jude Agboje, urged the court to restrain the defendants from implementing the report because his clients would be adversely affected by it.
He said his clients had a pending suit, challenging the steps taken by the government in the recapitalisation and consolidation of the sector.
He said that Section 9 (4) of the Insurance Act exclusively empowered the National Insurance Commission to carry out such review, adding that the steps taken so far by the Attorney-General of the Federation and the Finance Minister were unconstitutional, null and void.
According to him, “If the defendants are not restrained in the interim, the applicants will suffer great loss in their investment running into billions of naira.”
Chikere granted the order stopping the defendants, in the interim, from re-certifying the licences given to the applicants, pending the determination of the substantive suit.
She also ordered that the report of the Malam Bala Zakariya’u-led committee should not be implemented until the substantive suit had been determined.
The order also barred NAICOM from any further breach of the Insurance Act 2003 and to respect Section 315 of the 1999 Constitution.
Industry watchers believe the court order will go a long way in playing a role in the perception of insurance practice in the country.
They argued that although the recapitalisation exercise was prescribed by the government in good faith, it would have been equally more rewarding if implemented according to the relevant law.
Reacting to the court pronouncement, the Chairman, Arbitrage, Prof. O. Akintola-Bello, told our correspondent on Saturday that although the government had the right to regulate the insurance industry through the NAICOM, it was, however, not proper for it to increase the capital base without first amending the relevant section of the law.
He said the court was right to say that the exercise should be stopped, adding that the law should be amended and taken to the National Assembly.
According to him, “The government has the right to regulate the industry. The government has the right to prescribe the entry capital for the industry through the National Insurance Commission. But the relevant Act has to be amended before such a step should be taken. If that has not been done, then the court is right to say it should be stopped. The amendment should have been done through the National Assembly.”
The Group Managing Director, NICON Group, Mr. Jimoh Ibrahim, alleged that, the commission committed illegality and misadvised the minister. He said the appropriate thing to have been done was to amend the Insurance Act 2003, just as the Central Bank of Nigeria did before the recapitalisation in the banking industry.
However, the Managing Director of Libra Insurance Brokers Limited, Mr. Banji Oke, said since the matter was in court, the proper thing to do now was to abide by the decision of the court.
Much as the defendants are expected to obey the court order, the development is also expected to throw up a lot of issues in the industry. Specifically, the biggest bargains the recapitalisation programme provided for the operators were the anticipated gains from the 45 per cent local content and the awakened interest by foreign investors.
While the 18-month exercise lasted, a number of foreign investors, who see Nigeria as a cash cow because of her oil wealth, reluctantly took interest in investing in the sector. Through their financial intervention, a number of companies were able to meet the prescribed capital base that was fixed by the government to grow the industry.
Private equity fund manager, EMP Africa, invested $46.5m (about N6bn) in Continental Reinsurance Plc as well as additional $4m from three other foreign investors, RP capital Group, Genesis Emerging Market Fund and South African Investec Asset Management.
In the same breath, the International Finance Corporation, an arm of the World Bank, invested $14m in Leadway Assurance Company Limited. Cornerstone Insurance Plc also got some partnership from South Africa while the world’s biggest insurer, American International Group also took interest in the nation’s insurance sector.
While the deals were on, indications emerged that the foreigners were sceptical of the ability of Nigerian government officials and some operators to keep their heads above muddy waters. It was based on this perception that some of the investors who had initially taken interest in the process changed their minds.
The operators saw the coming of the foreigners as an opportunity for them to move offshore where grounds would have been prepared for them through the influence of their partners.
Although the Federal Government is expected to grandstand over the court’s pronouncement, the legal battle only points to the fact that insurance business in the country is not likely to be taken seriously by foreigners. Observers believe that such a perception will equally cast doubts on the ability of the operators to benefit fully from the local content largesse, which majority of them had seen as an opportunity to run the sector profitably.
Since the court had pronounced that everything should go back to status quo, it is expected that the multinationals that were not too willing to transfer their risks to local insurers in the first place, will see this as an opportunity to halt discussions along that line or put a stop to future renewals.
Coupled with the above is the internal wrangling that is likely to occur while the court proceedings continue. During the recapitalisation programme, companies came together through mergers and acquisitions. Some composite operators ceded their life business licences to others while they merged with others to operate general business.
Industry watchers believe that if the operators are to follow the court’s pronouncement to the letter, the process of reorganisation will further hamper operations if some managing directors who became executive directors during the mergers decide to get their positions back.
While a number of chief executives contacted by our correspondent reserved their comments on the issue, the Group Chairman of Alliance and General Insurance Plc, Chief Biyi Olafisoye, said that regulators all over the world always encouraged mergers where shareholders had voluntarily agreed to do business together, pointing out that it was sad that NAICOM was untidy in executing the exercise.
Insurance: Sustained awareness, key to future development
Sunday Ojeme
An electronic mail inquiry on insurance practice in Nigeria put across to audience in the Yahoo question column by our correspondent on Friday provided a response, which confirms the embarrassingly low awareness level of Nigeria’s insurance industry to some people within and outside the country.
In one of the replies, a respondent noted that, “Nigeria has a history of fraud and corruption. This has been made worse in recent years by the increase in scams. This makes offering insurance very risky. To my knowledge, insurance in the traditional sense is only available to multi-national corporations through companies like Lloyds of London. If anyone has heard of an operating insurance industry in Nigeria I would love to hear about it.”
The history of insurance practice in Nigeria is replete with conservatism and a recluse attitude on the part of the practitioners. After 47 years of independence, insurance practice in the country had remained a stunted sector until recently when the reforms in the financial sector began to give a new direction to the industry.
Even at that, observers still believe that the operators, rather than look for avenues to project the new and forward looking sector to the outside world, have been engaging themselves in marketing strategies that are fraught with intrigues and lacking dynamics that will convince foreign investors of any seriousness.
After the first anointing Nigeria received on February 28, 1921, which signaled the establishment of the first insurance firm in the country, Royal Exchange Assurance Plc, the industry actually began to experience growth a few years after the civil war.
It all began by witnessing a very slow growth as there were less than three hundred motorcars registered in Lagos, without the marine, which was another common mode of transportation contributing much to the premium growth.
The sector witnessed a bit of expansion after the civil war when legislation was introduced for Workmen Compensation and Motor Vehicle Insurance. These classes of business introduced many customers to the need for and benefits of insurance.
In addition, the early days of industrialisation and manufacture had created greater insurance requirements. It was at this time, that these relatively large volumes of business attracted other insurance companies to Nigeria and encouraged the formation of local insurance offices.
In the 1970s with increasing business growth, owing to the great strides being taken by the economy of the country in manufacture, improved road facilities, and the recovery from the misfortunes of the late 1960s, there was the need for greater awareness and transaction.
However, the excitement in the industry came to an end the moment indigenous investors began to take charge of the sector. Although it is a business driven by agents, the operators failed in their duty to educate Nigerians on the importance of transferring their risks.
The country has paid dearly for this unavoidable oversight judging from the gains countries like South Africa and India have made from insurance. According to experts, Nigeria covers less than one per cent of her insurable population, making her one of the countries with the lowest insurance penetration in the world.
According to an overview by Nigerianinvestments.com, the industry’s asset base as at December 2004 was N154.12bn as against N54.30bn in 2000.
The site also revealed that, “By way of comparison, the total asset size of the insurance industry was about 4.01 per cent of the total assets of Nigerian banks as at December 2004. The gross premium income of the industry in 2004 was N69.41bn with a growth rate of 118.32 per cent over the gross premium level of N27.67bn in 2000. It shot up to about N80bn in 2005.
“Although the growth has been adjudged impressive, only 19.47 per cent of the total premium was realised from life insurance business. This was caused by the low level of insurance awareness in Nigeria as a result of unattractive products to mobilise long-term funds in the system.”
The industry gross premium in relation to the Gross Domestic Product as at 2004 was 0.98 per cent against 14.38 per cent in South Africa. Life insurance premium per capital in United States dollars stood at $0.7 as against $545 in South Africa, while the non-life insurance premium capita in US$ stood at $3.3 as against $141 in South Africa.
As for regulation in the industry, the first major step at regulating the activities of industry was the report of J.C. Obande Commission of 1961, which resulted in the establishment of Department of Insurance in the Federal Ministry of Trade and which was later transferred to the Ministry of Finance. The report also led to the enactment of Insurance Companies Act 1961, which came into effect on 4th May 1967.
In 1968, insurance companies regulations was put in place to facilitate the implementation of Act No 58 of 1961 which then classified the business into different classes for registration purpose and relevant forms for record keeping.
Insurance Decree No 59 of 1976 was enacted putting together the provisions of the various laws.
Decree No 58 of 1991 was enacted improving provisions of Decree No 58 of 1979 and No 40 of 1988. The major highlights of 1991 Decree include; Increased paid-up share capital of insurers and re-insurers in respect of non-life business and life business respectively, compulsory membership of trade associations; management of security fund by NIA; Practice of no-premium, no-cover.
In 1992, the Insurance Special Supervision Fund decree No 62 was enacted, establishing a body known as National Insurance Supervisory Board, bringing out Insurance supervision outside core civil service, changing designation of Chief Executive from Director of Insurance to Commissioner for Insurance and setting up the Board of Directors to oversee the affairs of the established Body. All this provisions were made to attract high-level manpower.
Other provisions were made in reviewing decree No 62 of 1992, decree No 1 of 1997; change of name from National Insurance Supervisory Board to National Insurance Commission, establishment of governing board, staffing, source and application of funds, control and management of failed and failing insurance companies, supervisory functions and powers.
However, some deficiencies noticed in the law prompted NAICOM to initiate a committee, including key players in the industry to review it, which now gave birth to the new Insurance ACT of 2003.
The major experience in the sector in the last few years has to do with recapitalisation to enable the industry compete with its counterparts all over the world. While experts believe that insurance firms are supposed to own banks the reverse is this case in this clime.
Report said during the just concluded recapitalisation programme, at least N30bn fresh funds realised from the exercise will be traceable to banks with interests in insurance companies.
The report said some eight banks played vital roles in ensuring that their insurance subsidiaries met the sector’s new minimum capital requirement.
The lackluster performance compelled the administration of President Olusegun Obasanjo to call on the operators to increase their shareholders’ funds soon after the banks had successfully recapitalised.
On September 5, 2005, a former Minister of Finance, Dr. Ngozi Okonjo-Iweala, issued a directive raising the capital base from N350m to N10bn for reinsurers and from N150m to N2bn for life business operators and N200m to N3bn for general business. The operators had between September 8, 2005 and February 28, 2007 to achieve the new minimum capital requirement.
The then Commissioner for Insurance, Chief Emmanuel Chukwulozie, was passionate about the directive and went ahead to convince his colleagues in the industry on the need to lift the industry from its lowly and derisive state.
Prior to the pronouncement, the total market capitalisation for the insurance industry stood at N30bn spread among 103 insurers and four reinsurers. This was seen as grossly inadequate by any standard.
Given the recapitalisation to the tune of N25bn for the banks, two or three banks could comfortably purchase all the insurance companies.
A number of operators were, however, not comfortable with the directive just as they proffered that insurance operations did not require such huge sums to do business while some others differed.
The Managing Director of LASACO Assurance Plc, Dr. Olusola Ladipo-Ajayi, said the failure by insurance industry to increase its capital base through its own initiative necessitated government’s interventions.
The 2005 directive was the second time government would raisie capital base in the industry within two years. The first one was after the Insurance Act 2003.
The Managing Director of Niger Insurance Plc, Malam Bala Zakariyau, said, "The industry has been expecting a change in line with the reforms of government to increase the capital base of insurance companies and I believe individual companies will have to go to the drawing board and see how best they could continue in business."
Within the 18-month period, various mechanisms including mergers and acquisitions, private placements, share offers among others were put in place to source for funds.
After the exercise, which ended February, the industry moved from N30bn capitalisation to almost N200bn. It also successfully mobilized more than $100m in foreign direct investment into the economy.
Although, the programme was adjudged successful by a section of observers, the immediate past Minister of Finance, Mrs. Nenadi Usman, however, picked holes in it and directed that it be reviewed.
The review of the exercise by a panel set up by the ex-minister has come out to constitute another clog in the wheel of the industry as the operators have been kept in suspense for over six months with their money realised from the recapitalisation exercise still withheld in an escrow account with the Central Bank of Nigeria.
Although the current position of things in the industry projects some level of confusion, operators believe the near future is bright for the industry judging from the consistent volume of growth experienced through increases in gross premium and other profit indicators.
The Chairman of LASACO Assurance Plc, Chief Akin Leigh, said, “Insurance industry in Nigeria has come of age. It has moved from that stage where badly dressed marketers and agents used to be the parameter for measuring insurance practice in the country.”He said with the new capital base and the Federal Government’s 45 per cent local content largesse, the industry would experience a positive change in the nearest future that will erase the shortcomings of the last 47 years.
Law Union records 150% growth in first quarter
Sunday Ojeme
Law Union & Rock Insurance Plc has recorded a post-tax profit growth of 153.8 per cent during the first quarter of 2007. The profit grew from N53.9m recorded in the corresponding period of March 2006 to N136.8m for the period ended March 31, 2007.
A statement obtained by our correspondent on Monday said pre-tax profit also went up to N177m representing an increase of 122 per cent over the preceding year’s figure of N77m, while turnover grew by 72 per cent to N729.6m over the preceding year’s first quarter figure of N423.6m.
The statement said the improvement was attributable to increase in the company’s volume of underwriting business and the strong market confidence it enjoyed.
The company’s financial results for the year ended December 31, 2006 also revealed that the turnover rose to N1.33bn in December 2006 from N1.10bn in December 2005, while profit after tax grew to N179.3m from N165m recorded in 2005.
The statement quoted analysts as saying that the feet achieved in the first quarter of 2007 was commendable especially considering what is happening in the insurance sub-sector. The statement said with a capital base of close to N5bn, Law Union & Rock was now stronger and better positioned to play in the big league in the insurance market.
Law Union is currently enjoying strong market confidence in the capital market, leading to a rise in the value of the stock in the last eight months.
The company’s stock, which traded at N1.58 kobo as at January 4, 2006, closed at N3.68 as at September 13, 2007, representing a capital gain of N2.1kobo or 132.9 per cent.
Law Union is one of the insurance firms recently recertified by the National Insurance Commission to carry on non-life risk underwriting.
The recertification of the company followed a successful recapitalisation during which the insurer went to the market to raise more equity funds to beef up its capital base in line with the requirement of a minimum equity capital of N3bn for non-life insurance firms in the country.
Sovereign Trust confirms growth with first quarter results
The first quarter result of Sovereign Trust Insurance Plc has revealed a net premium increase of 24 per cent, according to a statement on Friday.
The financial performance for the period ended March 31, 2007 shows a gross premium income of N605.91m as against the N485.08m recorded in 2006.the figure represented 24.91 per cent improvement.
The statement added that within the same period, the company’s net premium income peaked at N525.32m, a 24.75 percent increase over the N421.14m recorded in 2006.
Total investment income and other incomes raked in by the firm in the first quarter of the year was a 448.34 per cent higher than what it posted in the first quarter of 2006, having improved from N21.74m to N119.21m.
In the same vein, STI also paid claims to the tune of N158.21m, up from N107.26m that was paid out to various policyholders within the same period in 2006 representing 47.50 per cent improvement in customers’ expectations met and surpassed.
The statement said the company also put its profit before taxation in the first quarter of the year at N177.97m, a 146.60 per cent improvement over the N72.17m recorded in 2006 while its profit after tax rose to N156.61m, up from N61.34m recorded in the first quarter of 2006 representing 155.31 per cent increase.
Within the period, the company increased its capital base from N1.12bn to N2.04bn, an 82.14 per cent increase while it also raised its contingency reserve by as much as 105.05 per cent within the first quarter of the year from N147.50m in the first quarter of 2006 to N302.88m as at the end of March. Its share premium account was boosted by as much as 1673.67 per cent, having been raised from N18.57 by the first quarter of last year to N329.37m.
Commenting on the feat, the Chairman of the company, Chief Ephraim Faloughi, said the growth in the company’s financials would place it ahead in taking a larger share of the market, especially in the oil and gas sector.
He said, “It is also obvious that the future of insurance business is bright in Nigeria especially with government’s expected implementation of the 45 percent local content policy in the oil and gas sector which will significantly boost insurance income. We have taken strategic steps to strengthen our push for a huge chunk of this emerging market and are currently one of the leading oil and gas underwriters in the nation.”
The statement said STI, within the first quarter, also brought down the balance in its life fund by 51.85 per cent, having reduced it from N73.09m by the end of March 2006 to N35.18m by March 31, 2007.
The company also raised its short-term investments by a whopping 121.82 percent while reducing its investments on long-term assets by 15.49 percent.
Shareholders’ interest in the company rose by as much as 118.67 per cent within the period review peaking at N3.28bn up from N1.5bn just as the firm’s assets were raised by as much as 106.63 percent from N1.81bn as at the end of March 2006 to N3.74bn as at March 31, 2007 while its statutory deposits was shored up to the tune of N375m by the end of the first quarter of this year.
The Managing Director, Mr. Seun Ajayi, encouraged the employees to embrace customer service excellence while bracing up for total quality management. He advised them to uphold productivity culture, team building, interpersonal relations, service excellence, improved corporate and individual performances, work ethics and corporate profitability, leadership strategies, and effective communication as a way of improving on customer service excellence.
The consolidated Sovereign Trust Insurance Plc is the product of a combination between the original Sovereign Trust Insurance Plc, Confidence Insurance Plc, Coral International Insurance Company Limited and Prime Trust Insurance Company Limited.
Insurance firms advised to adopt local software
Nigerian insurance operators have been advised on the need to adopt local software for their operations rather than stick to foreign ones.
Making this declaration in a statement, the Managing Director, General System Technology, designers of Perfect Policy software, Mr. Shola Kuku, said Nigerian insurers had become wiser and now knew that what mattered in a solution was not how much, but the functionality in the solution in question.
He said the vogue before now was foreign software, which is highly expensive but with not much to offer in terms of package, pointing out that for every upgrade, the user was expected to pay more, while for maintenance the companies paid higher prices.
According to him "The vogue before now was for insurance companies in the country to go for foreign software not minding the content richness of the solution as well as the cost. This became a big burden on the firms. With the cost of upgrade very high, as the packages are designed to demand upgrades to offer more functions and the high cost of maintenance by expatriates and the payment in foreign currency, the burden was crushing."
He said Nigerian software had proven to be functionally rich and covered all aspects of insurance business, adding that Perfect Policy had become the toast of insurance companies because it does not require the cost of upgrades.
“Everything needed for effective operations of an insurance firm is incorporated into Perfect Policy. It incorporates features that address all the operational requirements of an insurance company to render top of the range services to clients,” he said.
He said the software addressed branch operations, agency/broker administration, short-term/non-life businesses (all classes), life, pension and mortgage schemes, claims administration, risk management/reinsurance, insurance premium accounting, as well as management information/statistical reporting among other things.
He also revealed that 10 insurance companies and others in some African countries had adopted the software from the stable of his company.
He said General System Technology was an indigenous insurance software research and development company that dedicated its resources and manpower to purely insurance solutions, adding that the company's decision to focus on insurance research and development was to ensure a steady flow of new products computerisation and the continued improvement and upgrading of existing ones.
Insurer tasks colleagues on developmental product
Insurance institutions in the country have been challenged to look the way of the Small and Medium Scale Enterprises in the development of their business strategies.
The Group Managing Director, Alliance and General Insurance Mr. Ademola Aina who threw the challenge said that the current government efforts at growing the SMEs should be seen as presenting business opportunities for the insurance sector.
Mr. Aina therefore called on insurance companies to take advantage of the huge potentials in the small business by developing risk management services that will adequately serve the needs of the organized Small and Medium Enterprises in order to achieve sustained economic growth.
These revelations were made by the Alliance and General Insurance boss in a presentation focused on developing new products for under-served markets.
According to Aina, many Nigerian businesses do not appreciate and patronize insurance companies beyond the conventional policies due to the relative ignorance about its working and the sense of irrelevance of its policies to their daily life and business.
The Group Managing Director while speaking on the untapped market singled out the small business sector as the most neglected group and called on insurers to come-up with new products that will be relevant to the size, structure and budgets of the sector.
"it is a known fact that most developed economies are so because of the vibrant small sector that they have and if we are serious about taking our economy to the next level as shown by the present administration it is only natural for us to pay attention to the sector that can facilitate it"
speaking further "the government has put the enabling law in place for small business owners to access fund through the banking institutions but the insurance sector must leverage on their new financial strength to fashion risk transfer products that can adequately cater for the small business while taking their peculiar nature into consideration"
Aina disclosed that there are enormous benefits to be reaped by the nations’ economy when small businesses are adequately covered from risks inherent in their day to day activities.
Justifying his position, he declared that majority of businesses in Nigeria are found within the category and they still remain the highest employer of labour; by extension the sustaining sector of the masses.
He cautioned that total dependence on natural resources is not a healthy policy position for the country. Mr. Aina stated that the tax income to be derived from the small sector will go a long way in contributing to the nations’ annual spending citing Britain and America as countries with very vibrant small enterprise sectors impacting positively on their economy.
Meanwhile, Alliance and General Insurance has restated its position to play a leading role in new product development to herald its arrival as the one-stop-shop of risk management services in the market."Insurance has been perceived by a greater majority as the least relevant to their daily needs by the average Nigerian, all that will change in the days ahead" Aina concluded.
By Sunday Ojeme
The gradual ascension of the insurance industry in Nigeria to global relevance witnessed a turn on Thursday when a Federal High Court sitting in Abuja put a stop to the ongoing recapitalisation programme.
NICON Insurance Plc and Alliance & General Insurance Plc had gone to the court to challenge the exercise based on perceived illegality.
The pronouncement of the court, according to observers, has drawn back the hands of the clock in an industry was compelled to put its house in order and become relevant and competitive among its peers across the world.
Going by the intrigues and personal interests that characterised the review of the recapitalisation programme, industry watchers had long predicted the current development.
Prior to the court pronouncement, the operators had been thrown into confusion over the inability of the National Insurance Commission to release the list of the verified companies.
While the Commissioner for Insurance, Mr. Fola Daniel, had promised at one of his official outings, that the list would be out in a matter of days, findings by our correspondent last week revealed that the Ministry of Finance was yet to finalise work on the report submitted by a technical committee set up to review the recapitalisation programme.
The release of the list and that of the N170bn held in an escrow account with the Central Bank of Nigeria had been the problem plaguing the sector before last week’s bombshell which had been anticipated by keen observers who had predicted that more legal battles awaited the regulators.
True to their prediction, Justice Anwuri Chikere of the Federal High Court on Thursday issued an interim order restraining the Federal Government from further recapitalising and consolidating the insurance sector as well as barring the Attorney-General of the Federation and the Minister of Finance from implementing the report and recommendations of the Presidential Committee on Insurance Capitalisation set up by a former Minister of Finance, Mrs. Nenadi Usman.
NICON, through its counsel, told the court that part of the committee’s report recommended that the Federal Government should review the privatisation of NICON Insurance.
Counsel to the applicants, Mr. Jude Agboje, urged the court to restrain the defendants from implementing the report because his clients would be adversely affected by it.
He said his clients had a pending suit, challenging the steps taken by the government in the recapitalisation and consolidation of the sector.
He said that Section 9 (4) of the Insurance Act exclusively empowered the National Insurance Commission to carry out such review, adding that the steps taken so far by the Attorney-General of the Federation and the Finance Minister were unconstitutional, null and void.
According to him, “If the defendants are not restrained in the interim, the applicants will suffer great loss in their investment running into billions of naira.”
Chikere granted the order stopping the defendants, in the interim, from re-certifying the licences given to the applicants, pending the determination of the substantive suit.
She also ordered that the report of the Malam Bala Zakariya’u-led committee should not be implemented until the substantive suit had been determined.
The order also barred NAICOM from any further breach of the Insurance Act 2003 and to respect Section 315 of the 1999 Constitution.
Industry watchers believe the court order will go a long way in playing a role in the perception of insurance practice in the country.
They argued that although the recapitalisation exercise was prescribed by the government in good faith, it would have been equally more rewarding if implemented according to the relevant law.
Reacting to the court pronouncement, the Chairman, Arbitrage, Prof. O. Akintola-Bello, told our correspondent on Saturday that although the government had the right to regulate the insurance industry through the NAICOM, it was, however, not proper for it to increase the capital base without first amending the relevant section of the law.
He said the court was right to say that the exercise should be stopped, adding that the law should be amended and taken to the National Assembly.
According to him, “The government has the right to regulate the industry. The government has the right to prescribe the entry capital for the industry through the National Insurance Commission. But the relevant Act has to be amended before such a step should be taken. If that has not been done, then the court is right to say it should be stopped. The amendment should have been done through the National Assembly.”
The Group Managing Director, NICON Group, Mr. Jimoh Ibrahim, alleged that, the commission committed illegality and misadvised the minister. He said the appropriate thing to have been done was to amend the Insurance Act 2003, just as the Central Bank of Nigeria did before the recapitalisation in the banking industry.
However, the Managing Director of Libra Insurance Brokers Limited, Mr. Banji Oke, said since the matter was in court, the proper thing to do now was to abide by the decision of the court.
Much as the defendants are expected to obey the court order, the development is also expected to throw up a lot of issues in the industry. Specifically, the biggest bargains the recapitalisation programme provided for the operators were the anticipated gains from the 45 per cent local content and the awakened interest by foreign investors.
While the 18-month exercise lasted, a number of foreign investors, who see Nigeria as a cash cow because of her oil wealth, reluctantly took interest in investing in the sector. Through their financial intervention, a number of companies were able to meet the prescribed capital base that was fixed by the government to grow the industry.
Private equity fund manager, EMP Africa, invested $46.5m (about N6bn) in Continental Reinsurance Plc as well as additional $4m from three other foreign investors, RP capital Group, Genesis Emerging Market Fund and South African Investec Asset Management.
In the same breath, the International Finance Corporation, an arm of the World Bank, invested $14m in Leadway Assurance Company Limited. Cornerstone Insurance Plc also got some partnership from South Africa while the world’s biggest insurer, American International Group also took interest in the nation’s insurance sector.
While the deals were on, indications emerged that the foreigners were sceptical of the ability of Nigerian government officials and some operators to keep their heads above muddy waters. It was based on this perception that some of the investors who had initially taken interest in the process changed their minds.
The operators saw the coming of the foreigners as an opportunity for them to move offshore where grounds would have been prepared for them through the influence of their partners.
Although the Federal Government is expected to grandstand over the court’s pronouncement, the legal battle only points to the fact that insurance business in the country is not likely to be taken seriously by foreigners. Observers believe that such a perception will equally cast doubts on the ability of the operators to benefit fully from the local content largesse, which majority of them had seen as an opportunity to run the sector profitably.
Since the court had pronounced that everything should go back to status quo, it is expected that the multinationals that were not too willing to transfer their risks to local insurers in the first place, will see this as an opportunity to halt discussions along that line or put a stop to future renewals.
Coupled with the above is the internal wrangling that is likely to occur while the court proceedings continue. During the recapitalisation programme, companies came together through mergers and acquisitions. Some composite operators ceded their life business licences to others while they merged with others to operate general business.
Industry watchers believe that if the operators are to follow the court’s pronouncement to the letter, the process of reorganisation will further hamper operations if some managing directors who became executive directors during the mergers decide to get their positions back.
While a number of chief executives contacted by our correspondent reserved their comments on the issue, the Group Chairman of Alliance and General Insurance Plc, Chief Biyi Olafisoye, said that regulators all over the world always encouraged mergers where shareholders had voluntarily agreed to do business together, pointing out that it was sad that NAICOM was untidy in executing the exercise.
Insurance: Sustained awareness, key to future development
Sunday Ojeme
An electronic mail inquiry on insurance practice in Nigeria put across to audience in the Yahoo question column by our correspondent on Friday provided a response, which confirms the embarrassingly low awareness level of Nigeria’s insurance industry to some people within and outside the country.
In one of the replies, a respondent noted that, “Nigeria has a history of fraud and corruption. This has been made worse in recent years by the increase in scams. This makes offering insurance very risky. To my knowledge, insurance in the traditional sense is only available to multi-national corporations through companies like Lloyds of London. If anyone has heard of an operating insurance industry in Nigeria I would love to hear about it.”
The history of insurance practice in Nigeria is replete with conservatism and a recluse attitude on the part of the practitioners. After 47 years of independence, insurance practice in the country had remained a stunted sector until recently when the reforms in the financial sector began to give a new direction to the industry.
Even at that, observers still believe that the operators, rather than look for avenues to project the new and forward looking sector to the outside world, have been engaging themselves in marketing strategies that are fraught with intrigues and lacking dynamics that will convince foreign investors of any seriousness.
After the first anointing Nigeria received on February 28, 1921, which signaled the establishment of the first insurance firm in the country, Royal Exchange Assurance Plc, the industry actually began to experience growth a few years after the civil war.
It all began by witnessing a very slow growth as there were less than three hundred motorcars registered in Lagos, without the marine, which was another common mode of transportation contributing much to the premium growth.
The sector witnessed a bit of expansion after the civil war when legislation was introduced for Workmen Compensation and Motor Vehicle Insurance. These classes of business introduced many customers to the need for and benefits of insurance.
In addition, the early days of industrialisation and manufacture had created greater insurance requirements. It was at this time, that these relatively large volumes of business attracted other insurance companies to Nigeria and encouraged the formation of local insurance offices.
In the 1970s with increasing business growth, owing to the great strides being taken by the economy of the country in manufacture, improved road facilities, and the recovery from the misfortunes of the late 1960s, there was the need for greater awareness and transaction.
However, the excitement in the industry came to an end the moment indigenous investors began to take charge of the sector. Although it is a business driven by agents, the operators failed in their duty to educate Nigerians on the importance of transferring their risks.
The country has paid dearly for this unavoidable oversight judging from the gains countries like South Africa and India have made from insurance. According to experts, Nigeria covers less than one per cent of her insurable population, making her one of the countries with the lowest insurance penetration in the world.
According to an overview by Nigerianinvestments.com, the industry’s asset base as at December 2004 was N154.12bn as against N54.30bn in 2000.
The site also revealed that, “By way of comparison, the total asset size of the insurance industry was about 4.01 per cent of the total assets of Nigerian banks as at December 2004. The gross premium income of the industry in 2004 was N69.41bn with a growth rate of 118.32 per cent over the gross premium level of N27.67bn in 2000. It shot up to about N80bn in 2005.
“Although the growth has been adjudged impressive, only 19.47 per cent of the total premium was realised from life insurance business. This was caused by the low level of insurance awareness in Nigeria as a result of unattractive products to mobilise long-term funds in the system.”
The industry gross premium in relation to the Gross Domestic Product as at 2004 was 0.98 per cent against 14.38 per cent in South Africa. Life insurance premium per capital in United States dollars stood at $0.7 as against $545 in South Africa, while the non-life insurance premium capita in US$ stood at $3.3 as against $141 in South Africa.
As for regulation in the industry, the first major step at regulating the activities of industry was the report of J.C. Obande Commission of 1961, which resulted in the establishment of Department of Insurance in the Federal Ministry of Trade and which was later transferred to the Ministry of Finance. The report also led to the enactment of Insurance Companies Act 1961, which came into effect on 4th May 1967.
In 1968, insurance companies regulations was put in place to facilitate the implementation of Act No 58 of 1961 which then classified the business into different classes for registration purpose and relevant forms for record keeping.
Insurance Decree No 59 of 1976 was enacted putting together the provisions of the various laws.
Decree No 58 of 1991 was enacted improving provisions of Decree No 58 of 1979 and No 40 of 1988. The major highlights of 1991 Decree include; Increased paid-up share capital of insurers and re-insurers in respect of non-life business and life business respectively, compulsory membership of trade associations; management of security fund by NIA; Practice of no-premium, no-cover.
In 1992, the Insurance Special Supervision Fund decree No 62 was enacted, establishing a body known as National Insurance Supervisory Board, bringing out Insurance supervision outside core civil service, changing designation of Chief Executive from Director of Insurance to Commissioner for Insurance and setting up the Board of Directors to oversee the affairs of the established Body. All this provisions were made to attract high-level manpower.
Other provisions were made in reviewing decree No 62 of 1992, decree No 1 of 1997; change of name from National Insurance Supervisory Board to National Insurance Commission, establishment of governing board, staffing, source and application of funds, control and management of failed and failing insurance companies, supervisory functions and powers.
However, some deficiencies noticed in the law prompted NAICOM to initiate a committee, including key players in the industry to review it, which now gave birth to the new Insurance ACT of 2003.
The major experience in the sector in the last few years has to do with recapitalisation to enable the industry compete with its counterparts all over the world. While experts believe that insurance firms are supposed to own banks the reverse is this case in this clime.
Report said during the just concluded recapitalisation programme, at least N30bn fresh funds realised from the exercise will be traceable to banks with interests in insurance companies.
The report said some eight banks played vital roles in ensuring that their insurance subsidiaries met the sector’s new minimum capital requirement.
The lackluster performance compelled the administration of President Olusegun Obasanjo to call on the operators to increase their shareholders’ funds soon after the banks had successfully recapitalised.
On September 5, 2005, a former Minister of Finance, Dr. Ngozi Okonjo-Iweala, issued a directive raising the capital base from N350m to N10bn for reinsurers and from N150m to N2bn for life business operators and N200m to N3bn for general business. The operators had between September 8, 2005 and February 28, 2007 to achieve the new minimum capital requirement.
The then Commissioner for Insurance, Chief Emmanuel Chukwulozie, was passionate about the directive and went ahead to convince his colleagues in the industry on the need to lift the industry from its lowly and derisive state.
Prior to the pronouncement, the total market capitalisation for the insurance industry stood at N30bn spread among 103 insurers and four reinsurers. This was seen as grossly inadequate by any standard.
Given the recapitalisation to the tune of N25bn for the banks, two or three banks could comfortably purchase all the insurance companies.
A number of operators were, however, not comfortable with the directive just as they proffered that insurance operations did not require such huge sums to do business while some others differed.
The Managing Director of LASACO Assurance Plc, Dr. Olusola Ladipo-Ajayi, said the failure by insurance industry to increase its capital base through its own initiative necessitated government’s interventions.
The 2005 directive was the second time government would raisie capital base in the industry within two years. The first one was after the Insurance Act 2003.
The Managing Director of Niger Insurance Plc, Malam Bala Zakariyau, said, "The industry has been expecting a change in line with the reforms of government to increase the capital base of insurance companies and I believe individual companies will have to go to the drawing board and see how best they could continue in business."
Within the 18-month period, various mechanisms including mergers and acquisitions, private placements, share offers among others were put in place to source for funds.
After the exercise, which ended February, the industry moved from N30bn capitalisation to almost N200bn. It also successfully mobilized more than $100m in foreign direct investment into the economy.
Although, the programme was adjudged successful by a section of observers, the immediate past Minister of Finance, Mrs. Nenadi Usman, however, picked holes in it and directed that it be reviewed.
The review of the exercise by a panel set up by the ex-minister has come out to constitute another clog in the wheel of the industry as the operators have been kept in suspense for over six months with their money realised from the recapitalisation exercise still withheld in an escrow account with the Central Bank of Nigeria.
Although the current position of things in the industry projects some level of confusion, operators believe the near future is bright for the industry judging from the consistent volume of growth experienced through increases in gross premium and other profit indicators.
The Chairman of LASACO Assurance Plc, Chief Akin Leigh, said, “Insurance industry in Nigeria has come of age. It has moved from that stage where badly dressed marketers and agents used to be the parameter for measuring insurance practice in the country.”He said with the new capital base and the Federal Government’s 45 per cent local content largesse, the industry would experience a positive change in the nearest future that will erase the shortcomings of the last 47 years.
Law Union records 150% growth in first quarter
Sunday Ojeme
Law Union & Rock Insurance Plc has recorded a post-tax profit growth of 153.8 per cent during the first quarter of 2007. The profit grew from N53.9m recorded in the corresponding period of March 2006 to N136.8m for the period ended March 31, 2007.
A statement obtained by our correspondent on Monday said pre-tax profit also went up to N177m representing an increase of 122 per cent over the preceding year’s figure of N77m, while turnover grew by 72 per cent to N729.6m over the preceding year’s first quarter figure of N423.6m.
The statement said the improvement was attributable to increase in the company’s volume of underwriting business and the strong market confidence it enjoyed.
The company’s financial results for the year ended December 31, 2006 also revealed that the turnover rose to N1.33bn in December 2006 from N1.10bn in December 2005, while profit after tax grew to N179.3m from N165m recorded in 2005.
The statement quoted analysts as saying that the feet achieved in the first quarter of 2007 was commendable especially considering what is happening in the insurance sub-sector. The statement said with a capital base of close to N5bn, Law Union & Rock was now stronger and better positioned to play in the big league in the insurance market.
Law Union is currently enjoying strong market confidence in the capital market, leading to a rise in the value of the stock in the last eight months.
The company’s stock, which traded at N1.58 kobo as at January 4, 2006, closed at N3.68 as at September 13, 2007, representing a capital gain of N2.1kobo or 132.9 per cent.
Law Union is one of the insurance firms recently recertified by the National Insurance Commission to carry on non-life risk underwriting.
The recertification of the company followed a successful recapitalisation during which the insurer went to the market to raise more equity funds to beef up its capital base in line with the requirement of a minimum equity capital of N3bn for non-life insurance firms in the country.
Sovereign Trust confirms growth with first quarter results
The first quarter result of Sovereign Trust Insurance Plc has revealed a net premium increase of 24 per cent, according to a statement on Friday.
The financial performance for the period ended March 31, 2007 shows a gross premium income of N605.91m as against the N485.08m recorded in 2006.the figure represented 24.91 per cent improvement.
The statement added that within the same period, the company’s net premium income peaked at N525.32m, a 24.75 percent increase over the N421.14m recorded in 2006.
Total investment income and other incomes raked in by the firm in the first quarter of the year was a 448.34 per cent higher than what it posted in the first quarter of 2006, having improved from N21.74m to N119.21m.
In the same vein, STI also paid claims to the tune of N158.21m, up from N107.26m that was paid out to various policyholders within the same period in 2006 representing 47.50 per cent improvement in customers’ expectations met and surpassed.
The statement said the company also put its profit before taxation in the first quarter of the year at N177.97m, a 146.60 per cent improvement over the N72.17m recorded in 2006 while its profit after tax rose to N156.61m, up from N61.34m recorded in the first quarter of 2006 representing 155.31 per cent increase.
Within the period, the company increased its capital base from N1.12bn to N2.04bn, an 82.14 per cent increase while it also raised its contingency reserve by as much as 105.05 per cent within the first quarter of the year from N147.50m in the first quarter of 2006 to N302.88m as at the end of March. Its share premium account was boosted by as much as 1673.67 per cent, having been raised from N18.57 by the first quarter of last year to N329.37m.
Commenting on the feat, the Chairman of the company, Chief Ephraim Faloughi, said the growth in the company’s financials would place it ahead in taking a larger share of the market, especially in the oil and gas sector.
He said, “It is also obvious that the future of insurance business is bright in Nigeria especially with government’s expected implementation of the 45 percent local content policy in the oil and gas sector which will significantly boost insurance income. We have taken strategic steps to strengthen our push for a huge chunk of this emerging market and are currently one of the leading oil and gas underwriters in the nation.”
The statement said STI, within the first quarter, also brought down the balance in its life fund by 51.85 per cent, having reduced it from N73.09m by the end of March 2006 to N35.18m by March 31, 2007.
The company also raised its short-term investments by a whopping 121.82 percent while reducing its investments on long-term assets by 15.49 percent.
Shareholders’ interest in the company rose by as much as 118.67 per cent within the period review peaking at N3.28bn up from N1.5bn just as the firm’s assets were raised by as much as 106.63 percent from N1.81bn as at the end of March 2006 to N3.74bn as at March 31, 2007 while its statutory deposits was shored up to the tune of N375m by the end of the first quarter of this year.
The Managing Director, Mr. Seun Ajayi, encouraged the employees to embrace customer service excellence while bracing up for total quality management. He advised them to uphold productivity culture, team building, interpersonal relations, service excellence, improved corporate and individual performances, work ethics and corporate profitability, leadership strategies, and effective communication as a way of improving on customer service excellence.
The consolidated Sovereign Trust Insurance Plc is the product of a combination between the original Sovereign Trust Insurance Plc, Confidence Insurance Plc, Coral International Insurance Company Limited and Prime Trust Insurance Company Limited.
Insurance firms advised to adopt local software
Nigerian insurance operators have been advised on the need to adopt local software for their operations rather than stick to foreign ones.
Making this declaration in a statement, the Managing Director, General System Technology, designers of Perfect Policy software, Mr. Shola Kuku, said Nigerian insurers had become wiser and now knew that what mattered in a solution was not how much, but the functionality in the solution in question.
He said the vogue before now was foreign software, which is highly expensive but with not much to offer in terms of package, pointing out that for every upgrade, the user was expected to pay more, while for maintenance the companies paid higher prices.
According to him "The vogue before now was for insurance companies in the country to go for foreign software not minding the content richness of the solution as well as the cost. This became a big burden on the firms. With the cost of upgrade very high, as the packages are designed to demand upgrades to offer more functions and the high cost of maintenance by expatriates and the payment in foreign currency, the burden was crushing."
He said Nigerian software had proven to be functionally rich and covered all aspects of insurance business, adding that Perfect Policy had become the toast of insurance companies because it does not require the cost of upgrades.
“Everything needed for effective operations of an insurance firm is incorporated into Perfect Policy. It incorporates features that address all the operational requirements of an insurance company to render top of the range services to clients,” he said.
He said the software addressed branch operations, agency/broker administration, short-term/non-life businesses (all classes), life, pension and mortgage schemes, claims administration, risk management/reinsurance, insurance premium accounting, as well as management information/statistical reporting among other things.
He also revealed that 10 insurance companies and others in some African countries had adopted the software from the stable of his company.
He said General System Technology was an indigenous insurance software research and development company that dedicated its resources and manpower to purely insurance solutions, adding that the company's decision to focus on insurance research and development was to ensure a steady flow of new products computerisation and the continued improvement and upgrading of existing ones.
Insurer tasks colleagues on developmental product
Insurance institutions in the country have been challenged to look the way of the Small and Medium Scale Enterprises in the development of their business strategies.
The Group Managing Director, Alliance and General Insurance Mr. Ademola Aina who threw the challenge said that the current government efforts at growing the SMEs should be seen as presenting business opportunities for the insurance sector.
Mr. Aina therefore called on insurance companies to take advantage of the huge potentials in the small business by developing risk management services that will adequately serve the needs of the organized Small and Medium Enterprises in order to achieve sustained economic growth.
These revelations were made by the Alliance and General Insurance boss in a presentation focused on developing new products for under-served markets.
According to Aina, many Nigerian businesses do not appreciate and patronize insurance companies beyond the conventional policies due to the relative ignorance about its working and the sense of irrelevance of its policies to their daily life and business.
The Group Managing Director while speaking on the untapped market singled out the small business sector as the most neglected group and called on insurers to come-up with new products that will be relevant to the size, structure and budgets of the sector.
"it is a known fact that most developed economies are so because of the vibrant small sector that they have and if we are serious about taking our economy to the next level as shown by the present administration it is only natural for us to pay attention to the sector that can facilitate it"
speaking further "the government has put the enabling law in place for small business owners to access fund through the banking institutions but the insurance sector must leverage on their new financial strength to fashion risk transfer products that can adequately cater for the small business while taking their peculiar nature into consideration"
Aina disclosed that there are enormous benefits to be reaped by the nations’ economy when small businesses are adequately covered from risks inherent in their day to day activities.
Justifying his position, he declared that majority of businesses in Nigeria are found within the category and they still remain the highest employer of labour; by extension the sustaining sector of the masses.
He cautioned that total dependence on natural resources is not a healthy policy position for the country. Mr. Aina stated that the tax income to be derived from the small sector will go a long way in contributing to the nations’ annual spending citing Britain and America as countries with very vibrant small enterprise sectors impacting positively on their economy.
Meanwhile, Alliance and General Insurance has restated its position to play a leading role in new product development to herald its arrival as the one-stop-shop of risk management services in the market."Insurance has been perceived by a greater majority as the least relevant to their daily needs by the average Nigerian, all that will change in the days ahead" Aina concluded.
Subscribe to:
Posts (Atom)