Dr. Femi Oyetunji is the Group Managing Director/CEO, Continental Reinsurance Plc, one of the leading reinsurance companies with businesses across 50 countries within the continent of Africa. The wholly indigenous company which has recorded a number of feats in the over three decades of its existence is fast expanding its frontiers overseas. In this interview with Ibrahim Apekhade Yusuf, Oyetunji speaks on the company’s expansionist drive, prospects and challenges. Excerpts:
Can you give us a growth trajectory of the company?
We started some 30 years ago as a local Nigerian company and in 2006 we were able to make recapitalisation by injecting capital from a private equity called Emerging Capital Partners, ECP from Washington, USA. Thankfully, 2006/2007 saw the transformation of Continental Re in terms of governance and process thanks to the ECP. I joined the company in 2011 and what I saw then was that we were a multinational company although we were seeing ourselves as a Nigerian local company. But we took a decision that there was need to close the gap in capital market across the continent and we felt strongly that Continental Re should fill that gap to create a strategy we have a vision of the premier of the insurance. At the time I joined in 2011 we had a branch office in Duala which we started in 2003 and a branch of in Nairobi which was started in 2008. New things evolved in terms of regulations, practice, etc. You also need to have good capital and for us then looking at the way regulation was going, we needed to be local in different regions. In Kenya we moved from being a branch to create a subsidiary in 2013 and in 2014 we created a subsidiary in Botswana. We intended to be local in those regions and be subjected to the local regulations and that entitled us to some benefits in terms of access to do business. But sure we are limited by capital and worth. So it’s most important that for us to achieve a rating in which it gives us ability to transact the right kind of business to give us some exposure to better our quality risk. So we embark on capital raising and a structure. If you follow the rating agencies, the rating is directly or indirectly by a domicile head office. I used the word domicile because there a lot of misconception in what we are trying to do. In Nigeria because a lot of things we put in place, in 2012 we upgraded to B+ and we were one company in Africa that is being rated. In terms of what we could do internally an enterprise management, we are on the quality of the right thing, process, we’ve gone two notches above sovereign of Nigeria. We cannot go high, we cannot achieve what we want to do with the structure in Nigeria even with the increase of capital to $500billion this year, it’ll not get us to where we are going and that is why we have took the steps we have taken thus far.
Following your successful scheme of arrangement with your shareholders what’s the next step and secondly do you plans to delist from the Nigerian Stock Exchange?
Let me emphasise that from the ongoing Scheme of Arrangement, we have no interest about delisting or not delisting. With the consequence of what we’ve done because the reason we couldn’t take everybody or individuals to Mauritius is that we now have only two or three shareholders and one of the shareholders being the nominee vehicle. Generally, the number of our shareholders should not be different if they elect to stay in the nominee vehicle. But in terms of individual entities, the advisers would follow up with the Stock Exchange on that. The next step is for us to submit the document and the result of the Court Ordered meeting to Security and Exchange Commission (SEC) and once we get SEC’s final approval we’ll go back to court to register it.
You set up a holding company in Mauritius, which is one of the countries regarded as a tax haven. Was your choice of Mauritius based on the fact that you want to cut down on your taxes and enjoy other benefits not readily available in Nigeria? In terms of capital mobilisatioon what is your target?
The name of the company is CRe Holding Limited, a company incorporated in the Republic of Mauritius as a private company limited by shares and duly registered and licensed by the Financial Services Commission which holds 65.20 per cent of the issues. If you look at the prospectus you will see the final structure we intend to operate. Each of the subsidiary companies will have a license and will be registered locally. So Cre Nigeria which is the licence we have now we’ll continue to operate in Nigeria, pays taxes in Nigeria, employs staff in Nigeria and does business in Nigeria. So it is not about tax incentives as such, but I will come back to why we chose Mauritius. The capital we require is not a fixed amount. Because of what is done globally now, the regulators who use risk-based capital supervision, and that means if I’m writing just shops I don’t need the same capital with somebody writing aviation. So what we are supposed to do is to look at the volatility of your portfolio and what capital you need to ensure that we say a one in two-hundred event happens, are you able to meet your liability. Reinsurance companies don’t wait for regulators to say this is the amount of capital you need. You need to be continuously building up your capital. The more you write, the more successful you are, the more capital you need. So our capture requirement is anything from $50million to $100million based on the kind of business you want to do. And that’s one of the problems that we have here in Nigeria. Most of our premiums from oil and gas is not taken out of the country because we don’t have enough capacity to retain within the continent. And our mantra at Continental Re is you must retain African premiums within Africa because those are the things we use to develop our roads, hospitals, build schools. And that’s the reason why for us, we need to build capital and have access to have advantage. Our choice of Mauritius is not because of the fact that it is a tax haven. No. It is because when you are looking at our industry, there are two main places where multinational insurance and re-insurance companies park their capital: it’s Mauritius in North Africa and Bermuda. So we looked at both. We are not yet at the level where we could take on requirement. So it is because it is an environment that the rating agencies understand and to assist us in sovereign rating in Nigeria, it will assist us in raising the required capital. So it has nothing to do with tax advantage.
As a company, what are your 2019 projections in terms of capital adequacy, dividends?
For me, 2019 projection I’m sure you’ll understand if I don’t give numbers. But in terms of our strategy document, our plan is to grow 25 percent beyond year-on-year and more than that. Our dividend policy again is related to capital requirement. The way we operate, Continental Re by way of our capital, which is risk-based if our capital adequacy is at a certain level we pay dividend if it’s below a certain level we don’t pay dividend. And if it’s between a certain ratio, then it determines how much dividend we pay. If it’s above 200 per cent there is no restriction on what dividend we pay. So your question cannot be answered until when the year end when we check our adequacy. And as I said, we need a lot of capital going forward and one of the things the shareholders have to decide is to take dividend and money back, that will happen after we’ve seen a year-end numbers.
What are you seeing in Mauritius based on regulatory environment and ease of doping business?
In Mauritius in terms of business, we are already writing business in Mauritius. We have business in 50 countries in Africa, including Mauritius so we are not going there newly. The only thing that is new is that the registered holding company would be in Mauritius and it’s because it’s a sophisticated financial centre. So far, we haven’t seen any negative signal from Mauritius. But maybe I should just reemphasise which is a good concern and not that I say it shouldn’t be assumed. Well, it has nothing to do about the people. I continue to work from here; we are building our head office in Victoria Island, Lagos so we are not physically moving to Mauritius. So there won’t be any loss of staff because of our new capital.
Looking at the insurance sector in Nigeria, what are the prospects and challenges?
Insurance sector in Nigeria face the same thing, deal with the same issues with that of other countries. But we in Nigeria, we need well-capitalised companies. I’m talking personally now and this is the same sentiment I expressed in 2005 and 2006 during the initial years. We must build big institutions. All those insurance companies sitting out there elsewhere will keep picking up our businesses. So it’s a tough environment for us in Nigeria, I’m talking about insurance generally, not even reinsurance. As you know, the economic environment has been a bit down for the last couple of years and when there’s economic downturn insurance is the first to suffer. So it’s tough for our environment.
What more are you doing in terms of further engaging some of the stakeholders and shareholders who are still disgruntled at the scheme of arrangement as proposed?
We have until the 3rd or 4th of January for election as whether they want cash or we should remain in as part of the nominee. So engagement continues. For us, it’s to explain and we are available 24/7 for any explanation that’s required. As I mentioned before we had the court ordered meeting few days ago, we had a two-three hours engagement with the shareholders at a sitting. But if there is any question that’s still burning, the shareholders have up till 3rd or 4th January to be explained to the shareholders.
There are also fears that the company may cash out and live the country anytime considering its affiliation to a foreign arm now. Are these fears unfounded or real?
Let me repeat this, our business structure and we have a strategy plan for 2020 remains unchanged. What this gives us is ability to attract more capital into this company. We cannot carve out the assets of the company because we need to build more capacity for us to be relevant going forward. Things are changing rapidly. I have some people say that we don’t need the rating. But people should check what happened to Kenya Re. Kenya Re has been downgraded and you know what the businesses they are doing. Tunis Re was downgraded but now the rating has been removed entirely. For Tunis Re, I don’t want to make any forecast about what whether they will be around in the next two-three years. Oman Re, is so big. Rating is the cornerstone of our business. Without having the relevant rating, we would not be relevant and that’s why for the management team as a whole, it is important for us to do things that would get us that rating. And that means bringing more capital, and retaining more capital, writing more profitable business to be able to retain more capital. So there is no way capital is going out of this company or asset from this company.
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