The Nation Newspaper

Category: Insurance

  • Mutual Benefits grows asset to N46b

    Mutual Benefits grows asset to N46b

    Mutual Benefits Assurance Plc’s asset base grew  from N44.1 billion in 2014 to N46.1 billion in its financial year, which ended 2015.

    The company, during the year under review, further increased its equity investment in its subsidiary, Mutual Benefits Life Assurance Limited by injecting N2billion into the business to bolster the assets cover of its operations in line with the newly released prudential guidelines of the National Insurance Commission (NAICOM).

    The firm’s gross premium written declined marginally by six per cent to N14.6 billion in 2015 from N15.5 billion in 2014.

    Speaking at the company’s 20th Annual General Meeting (AGM), Chairman, Mutual Benefits, Akin Ogunbiyi said the shortfall was driven by the lull in the economic activities during the year, resulting in delayed investment decisions and low disposal incomes.

    He said though the underwriting profit for 2015 reduced to N3.9 billion from N5.2 billion in 2014, representing a decline of 26 per cent, it is one of the highest in the industry as a percentage of net premium income at 50.3 per cent.

    According to him, the height was achieved as a result of the strong risk mitigation strategies adopted by the management. He said the divestment of the group from some non-insurance subsidiaries in 2015, including Mutual Model Transportation Limited and Charks Investment Limited, contributed negatively to the decrease in profit after tax from N4.2 billion in 2014 to NO.8 billion in 2015.

    He said: “Other key contributor was a fair value gain in investment properties of N2.6 billion in 2014 that was not repeated in 2015. It is worth noting that our foreign investments, Mutual Benefits Assurance Liberia and Mutual Benefits Niger Republic contributed about 13 per cent to the bottom-line of the group in 2015. Key business trends from these subsidiaries in 2016 remain positive with dividends already distributed by Mutual Benefits Liberia.”

    He told the shareholders that the Board was unable to declare dividends as a result of the economic downturn, which has affected the company’s ability to achieve the turnaround of its negative reserves in the envisaged time.

    “We have, however, embarked on some strategic initiatives geared towards speedily improving our financial position and performance and ensuring that we are able to declare dividends soon. In order to implement our new strategic initiatives, be ready for the regulatory ‘risks based’ requirements and take advantage of identified growth opportunities, your company is set to raise additional capital between fourth quarter of 2016 and first quarter of 2017 in line with the shareholders’ resolution of  January 30, 2014.

    “The resolution authorised the company to raise additional capital via the issue of debt or equity or a combination of both whether by way of private placement or otherwise or by way of an offer for subscription, upon such terms and conditions to be determined at the discretion of the Directors and subject to any requisite regulatory approvals,” he added.

    On board changes, Ogunbiyi added that since the last AGM, Prince Nasir Ado Bayero and Dr. Moses Ajaja resigned from the Board of the company with effect from August 6 and December 31, 2015.

    “On June 30, 2016, our erstwhile Chairman, Mr. Akin Opeodu, resigned from the Board after 21 years of service to the Company. Mr. Akin Opeodu joined the Board from inception in 1995. He was the Chairman of the Company between 2002 and 2007 and also between 2014 and 2016. He has contributed immensely to getting the Company to where it is today.

    “In January 2016, Messrs Lamis Shehu Dikko and Akinboye Oyewumi were appointed to the Board. I resigned from my position as the Group Managing Director and was elected to chair the Board effective 1st July, 2016,” he noted.

  • Africa’s reinsurers are bullish about $ 8.3b market

    The Africa’s reinsurance markets are expected to benefit from strong underlying growth, driven by an expansion of its primary markets with insurance premiums of US$ 64 billion.

    This is, according to the first Africa Reinsurance Pulse, launched at the 21st African Reinsurance Forum in Dakar, Senegal.

    The Africa Reinsurance Pulse is a yearly survey, by Dr. Schanz, Alms & Company, facilitated by Africa Re, the Africa Insurance Organisation (AIO), Swiss Re, Casablanca Finance City (CFC) and the Qatar Financial Centre (QFC). The study, based on in-depth interviews with 22 reinsurers and brokers operating in the region, provides a unique overview of the trends and drivers of Africa’s US$ 8.3 billion reinsurance market.

    The report read: “Based on an abundance of natural resources, the need for infrastructure investments, the emergence of an expanding middle class and a still young and growing population, the region’s GDP is expected to increase by roughly four per cent per annum from 2016 to 2020, ahead of the world’s average growth rate of 3.6 per cent for the period.

    “Africa’s low insurance penetration of 2.9 per cent, as a share of insurance premiums to GDP, indicates the enormous potential of the continent in catching up with the global average of 6.23 per cent for 2015. More than 90% of Africa’s insurance companies have only been created in the past 40 years,” says Corneille Karekezi, Group Managing Director & Chief Executive Officer of Africa Re.

    tal strengths of the African reinsurance markets remain intact, despite the recent economic slump.

     

     

     

  • Usman urges insurers to consolidate

    Usman urges insurers to consolidate

    Former Minister of National Planning , Shamsudeen Usman, has advised insurance operators to consolidate to grow the size of the industry.

    Shamsudeen, who is also a  former  Minister of Finance, made this known while addressing insurance operators at a forum in Lagos. He said the small size of the industry has hindered it from playing the role of a stabiliser in economic crisis.

    Citing reports from Augusto and Co., he said the balance sheet of all insurance companies is less than one third of one of the banks.

    According to him, there are certain characteristics of the insurance industry that actually make it more of a stabiliser, especially in times of economic crises like we are going through in the country.

    He said the ability of the sector to play the stabilising role depended on its size relative to the rest of the economy.

    He said: “Part of the reasons the Nigeria insurance industry has not played the stabilising role was because of the size of the industry. The balance sheet of all insurance companies is less than one third of one of the banks. This tells the issue of the size. I was a Deputy Governor in the Central Bank when the consolidation exercise happened with credit to former Central Bank Governor, Charles Soludo.

    “We went into a room and he made a presentation to the banking industry. Initially there was a lot of opposition. I remember when we were appointed to the CBN in 1999,  there were 907 banks. The total balance sheet of the 907 banks was less than one of the banks today. A 100 per cent of 1 is 1 while 10 per cent of 1000 is 100.  So do you prefer a 100 per cent of a tiny little thing or 10 per cent of a big thing, which can be 10 times the value of whatever you are getting?

    “I believe that the insurance industry itself has to be more forward looking into consolidation like it happened in the banking sector. Yes, many of you are afraid to lose your position of managing director, executive director of a small corner. But I think the industry will achieve more if you can come together and get bigger.”

    The former minister, however, said the industry has huge potential yet to be tapped.

    “The potential even from the point of view of the economics theory is that there is a strong link between the growth of an economy and the growth of the insurance industry. This has been a subject of many as even in the empirical studies in other countries, partly because of the role the industry plays in economic growth and stability through improving the investment climate and promoting more efficient volume and mix of activities. A number of researches have shown that there is a positive closer relationship between the industry and the wider economy,” he said.

     

  • Epetimehin to deliver lecture on micro-insurance

    Chairman Mofes Insurance Brokers Limited Prof Festus Mobolaji Epetimehin will deliver an inaugural lecture on mircro-insurance to hundreds of scholars and residents in Osun State.

    Epetimehin, a Professor of Insurance and Risk Management, will deliver lecture on “Small but big: Micro-insurance and the reduction of social risk of poverty”, at Joseph Ayo Babalola University (JABU) in Ikeji, Osun State next month.

    According to him, micro-insurance was considered as one of the most effective means of reducing the vulnerability of the poor from the impacts of disease, theft, violence, disability, fire and other hazards.

    He said insurance protects against unexpected losses by pooling the resources of many to compensate for the losses of the few, the more uncertain the event, the more insurance becomes the most economical form of protection.

    He noted that there was an unjust paradox that the poor are the most vulnerable to hazard, but have little or no access to efficient risk management strategies.

    Epetimehin said: “The reality is that the risk management process of the poor has to be transformed or completed by giving access to new opportunities. In this way, the poor becomes more empowered through the possibility to make choices. Micro-insurance could be such a new opportunity. It is a system that protects poor people against specific shocks, using risk pooling, in return for regular affordable premium payments proportionate to the likelihood and cost of the risk involved.”

    Micro-insurance does alleviate poverty by reducing the impact of hazard in rural areas, but protects clients from risk, reduces micro-finance institution (MFI) loan default, earns additional income for the MFIs, and enhancing outreach and scalability. It is thus a useful complement to, rather than a substitute for, savings and credit in protecting the poor against risk and allows them to retain and develop financial, social and human capital in the long term,” he added.

  • STI to entrepreneurs: sustain wealth with insurance

    The Managing Director, Sovereign Trust Insurance Plc, Olaotan Soyinka, has urged young entrepreneurs in Nigeria to embrace the culture of insurance at this critical period of economic recession in the country.

    He gave the advice at the 6th International Christian Business Conference & Exhibition, organised by Marketplace Apostles under the leadership of Pastor Uche Onochie in Port Harcourt, Rivers State capital.

    According to Soyinka, young and upcoming entrepreneurs, regardless of their religious backgrounds and denominations, will help put the economic wheel of the country in a working and stable condition.

    Entrepreneurship, he said, is devoid of religious affiliations. “Rather, it must be based on sound business ethics and practice,” he said, appealling to entrepreneurs to see insurance as a very integral part of their business as it is the only assurance to the sustainability of their wealth creation.

    He said: “Nigeria is highly blessed with so much natural and human resources, which have translated to a lot of wealth creation in the form of businesses and commercial activities that we see around us in the country today. The big question is how many of these businesses have that continuity and longevity elements that insurance provide.

    “There are enormous advantages in embracing insurance and making it a way of life. One can never go wrong with it.”

    Soyinka commended the efforts of the organisers of the exhibition in ensuring that the spirit of entrepreneurship thrives among the youths in the country.

    He called on other organisations and individuals to continue to support home-grown businesses as a way of stimulating the Nigerian economy, especially at this time of our receding economy.

    Entrepreneurs, he said, needed to take advantage of insurance products such as motor vehicle insurance, which include third party or comprehensive; builders’ liability insurance for buildings under construction; employer’s liability insurance and medical professional liability insurance, among others.

    He said Nigerians do not need to be compelled to do what would add value to their lives, rather, they should cultivate a proactive culture of sustaining their wealth and business concerns through a consistent insurance culture.

  • Premium embarks on industry promoting projects

    Premium Pension Limited is embarking on projects that will help promote the pension industry, the Managing Director of the company, Wilson Ideva, has said.

    Ideva, who made the statement after receiving two global awards: Wide Coverage/Inclusion and Corporate Governance Innovative awards,  at the just concluded World Pension Summit, Africa Special, in Abuja, said the awards are proofs of the firm’s first class services to clients.

    He noted that his firm believed that the growth of the industry was indicative of the  growth for pension firms. He noted that the awards would assure Retirement Saving Account (RSA) holders and retirees that the firm was focused and committed to best practices.

    Ideva maintained that one of the policies of the firm was to build structures and not individuals, stressing that the firm would continue to build on the laid down structures that promote first class service delivery to clients.

    He noted that the firm was unique in all its undertakings, adding that there was a team spirit amongst the members of staff, which enabled them to execute their functions without hassle.

    He said: “We are not building individuals in Premium Pension. We are indeed, building structures. This is the challenge we have in Africa, where you have a super managing director and every other person is subjected to him and when he l eaves, the whole place collapses.

    “I am just first among equals. I see my team members as my mates and every morning I go to their offices to greet, thank them and see the challenges they are having. That gives me firsthand view of what is going on.”

    He noted that the firm was well structured, adding that the structure helped the management in tackling challenges immediately they arose.

    The Executive Director, Business Development & Investment, Kayode Akande, said the awards would help reaching out to prospective clients easier.

    “The awards will tell enlightened clients about the institution they are dealing with. Remember, we are warehousing and managing the pension assets of people. People would want to be sure that the pension fund administrator that is managing their funds has got all the credibility.

    “It is beautiful that our industry has got credibility, the awards have now assured our clients that their PFA is termed to be the best in terms of corporate governance. When you say somebody is good in corporate governance, what it means is that all the necessary structures in managing financial assets have been put in place. This is the level of confidence the awards would give to any customer that understands what they are all about,” he said.

    Akande noted that the firm would continue to reach out to the hinterland to get as many people as possible on board.

    He stressed that the firm was working with the National Pension Commission (PenCom) to ensure that the micro pension scheme, which is the channel to bring majority of Nigerian working class into the pension scheme, came to fruition as soon as possible.

  • ‘Nigeria’s economy ’ll rebound in 2017’

    The International Finance Corporation (IFC) is the private sector arm of the World Bank Group. Its portfolio in Nigeria, which is in excess of $1.5 billion, cuts across the energy, manufacturing, healthcare and financial institutions sectors, among others. IFC’s Country Manager in Nigeria, Eme Essien Lore, is optimistic about the future. By next year, she says, the country’s economic environment would have stabilised; inflation brought to a moderate level; the financial sector reformed; the exchange rate stable and the trade regime liberalised. DANIEL ESSIET met her.

    The economy is in recession. How do you react to this? What can Nigeria do?

    I wouldn’t say that I am surprised at this development. Though we can’t say what really happened, it is not a surprise considering that we are experiencing the challenges of living in a mono economy. Nigeria is so reliant on one product. I think the big question for the government, development partners and the private sector is: how do we get ourselves out of this crisis? We should be concerned about how we make sure the economy doesn’t drift too far into recession, and ensure that some of the sectors that can get us back onto growth path remain somehow viable. The first thing is to stabilise the economy.

    How do we stabilise?

    The fiscal deficit has to be addressed, as well as the foreign exchange (forex) regime to achieve some stability. We should also encourage greater inflows of capital and foreign investments that the country desperately needs. Shortly after, there should be a focus on diversifying the economy. The oil sector contributes approximately 10 per cent to real Gross Domestic Product (GDP). We have services, manufacturing, and agriculture. All these should play important roles in growing our GDP. So far, they are not faring well in terms of promoting export growth.

    How do we ensure that we explore these sectors to contribute to economic growth in a way that diversification will come to play?

    Right now, there is some rule of law being applied to reform the system to enhance economic performance.  Nigeria has a low value added tax (VAT) regime- five percent- which we are not able to collect effectively. In West Africa, there are countries that have four to 10 percent VAT. The Minister of Finance said we recorded 20 per cent compliance rate in terms of VAT collection. Tax revenues are too low to finance the government’s programme. In light of the growing demand for infrastructure, it appears that the government must make greater efforts to improve its tax collection performance.

    There is an opportunity to look at where we can extract value within the economy without creating extra burdens on the people. At the same time, measures, such as achieving a lean and cost-effective government and fighting corruption remain as relevant as ever. This extraburden on the government’s finances calls for close monitoring of the fiscal situation. I see that the government is doing a lot by eliminating ghost workers, trying to reform some of the revenue-generating Ministries, Department and Agencies (MDAs) to improve what they contribute into its coffers. Succeeding in raising revenues will help the authorities to meet their financial responsibilities, as well as to find the fiscal space to make productive investments and to address the needs of Nigerians. On the whole, we have to think about stabilising the economy in the short term. The reality is that we have to stabilise the economy. We begin with stabilisation first, then diversification. The diversification strategy should be closely linked to the short-term stabilisation goal.

    While short-term macroeconomic stabilisation is important, a well-designed diversification strategy will pay attention to long-term development challenges. The government has to continue this without losing focus. The government must set up a lot of goals regarding diversification. The government should be committed to more economic diversification and choose the export-led model as a way of achieving its development objectives. The aim should be to diversify the production base, and to reduce the oil sector’s importance in the economy. Accelerating economic diversification should be done with various policy instruments. The reality is that the oil price crisis is going to continue for a while. We are going to find ourselves in both high and low demand situations. We have to make sure we protect the economy from this violent cycle. Planned initiatives to increase non-oil revenues must be given high priority to help compensate for the fall in oil revenues.

    If you were to recommend a diversification blueprint, what kind of features would be critical for implementation?

    Diversifying may appear easy; but it is not just about diversifying; it is about extracting values from the sectors that are supposed to be contributing to the nation’s GDP. For diversification to make impact, we have to look at the different sectors of the economy that is supposed to be contributing to growth. We have to look at each sector carefully and investigate what is the level of contribution that the sector is making to the economy.

    We carefully figure out all the areas where we have comparative advantage and implement policies to help us capitalise on that competitive advantage. For example, Nigeria has competitive advantage in agriculture. Therefore, there is a need to tailor policies to provide strategic direction for agriculture to grow, boost long-term growth and competitiveness of the sector. Investment in agriculture means a competitive farm sector that can drive the economy. The investment will help leverage private sector resources, which are vital to ensuring prosperity and competitiveness of our agriculture sector. Diversification should be pursued with the provision of the necessary critical infrastructure to support agricultural development.

    The shift of attention from the oil sector to the agricultural sector would, among other things, bring about a shift from monoculture economy. We should promote a competitive, sustainable, diverse and adaptable agricultural sector. It is not all about putting import restrictions across the sectors. That might not be the solution. It is really about taking careful import substitutions and promoting industrialisation. But it needs to be carried out within the stabilisation strategy. It has to be done carefully.

    To stabilise, we need to introduce some sort of subsidy to support every aspect of the sector, particularly on the import side. This will encourage people to go into production. So, it is a planned approach. We have great ideas, but fall short during implementation. These  things don’t happen overnight .They could take  five years, 10 years  to achieve  targets as planned.Things don’t just happen overnight.

    Despite the flexible exchange rate introduced by the Central Bank of Nigeria (CBN), the exchange rate is going high leaving the Naira in a deplorable condition. How do we address it?

    The Central Bank of Nigeria (CBN) announced the change in its position from the fixed exchange rate regime to allow the exchange rate to float freely and to find its equilibrium. What they are trying to do is what they ought to have done. It was becoming evident that the previous currency arrangement, which held the naira at an official exchange rate and restricted access to foreign currency, was not helping to achieve an orderly adjustment to the trade shock the country experienced. It is difficult to achieve devaluation goals within an economy like Nigeria with the structural inefficiencies that we have. Any economist will tell you that when you devalue a currency in an economy like Nigeria that have a lot structural inefficiencies, that the challenges will not leave immediately. The truth is that it is a step that should have been taken earlier. We cannot deny the fact that this needed to be done. Investors view a fixed exchange rate regime as too inflexible. If the CBN doesn’t allow the naira to drop enough, foreign investors will continue to shun our economy. Most investors would prefer a fully-floating naira. It may fuel inflation in the short term, but would make exports more competitive and encourage foreign investment. Certainly, the longer we waited to correct the situation, the longer it would take to correct it. So market forces have now taken over. The question to ask is for how long is that going to persist? We are put on the realm of speculations here.

    It is unclear. It is really unclear. We are in for some difficult days ahead. How long it will persist is what nobody knows. But what we have in Nigeria is an incredible opportunity. The government has a high degree of integrity. Some good steps have been taken, like the removal of fuel subsidy. The government is trying to introduce some prudent measures into the system.

    What is your economic outlook for the next three years?

    We do think that the economy will recover in 2017 for a couple of reasons. First of all, oil price may eventually stabilise. Since oil price is going to stabilise at a certain level, I think that will lead to the recovery of the economy. We hope to see the reform agenda take root. A lot of initiatives that the government has taken today are measures that take a long time for the impact to be felt. There is going to be inflation and pressure on purchasing power. It is going to be difficult to purchase even basic food items. The budget will prompt capital spending and that will boost growth. There may not be massive difference, but 2017 will be better than 2016.

    What will that be for Nigerians?

    For the ordinary citizens, I don’t think there will be much difference. Inflation will drive them to choose what to eat from the consumption basket because of limited purchasing power. I don’t think the average Nigerian is going to see a difference in real terms. It may be in the next two years that we begin to get ourselves out of that cycle. There is pressure on the economy and it is going to take time for Nigerians to see the difference. We have a great leadership with penchant to tackle corruption. We have never had this before.

  • Tax on premium depleting our profits, say operators

    Tax on premium depleting our profits, say operators

    Insurers have criticised the Federal Inland Revenue Service (FIRS) levy on premium, saying it is affecting their earnings.

    Prestige Assurance Plc Chairman Hassan Usman told shareholders in Lagos that the company’s 2015 result had been affected by the levy.

    He said the FIRS should have levied profits, instead of  premiums.

    Citing Prestige, Hassan said the firm’s earnings before tax was N20.3 million while loss after tax stood at N145.3 million in its 2015 financial  year.

    The huge gap, according to him, was caused by tax.

    Staco Insurance Plc, immediate past chairman,Dere Otubu, said the company made a profit before tax of N168.6 million, but that it went down to N84 million after it was taxed.

    For Consolidated Hallmark Insurance Plc, the profit before tax stood at N704.9 million, its Managing Director, Eddie Efekoha said, noting  that the profit after tax was reduced to N545.8 million.

    Meanwhile, the umbrella body of insurance companies in the country, the Nigeria Insurers Association (NIA), said the issue of multiple tax had lingered for too long.

    Its Director-General, Sunday Thomas, said the oversight function of the government agent was impacting on the business of member-companies.

    He said: “The leadership of the association met with the executive chairman and management of the FIRS in furtherance of its efforts at resolving the lingering tax issue.

    “The association has intervened even as it maintained cordial relationship with the FIRS. At the end of the meeting, the association received strong assurance from the FIRS team that the issues raised by the NIA delegation would be addressed.”

  • FBN chief advises operators to restrategise

    For the insurance industry to survive crashing oil prices, there is the need to restrategise on product innovation, refocuse distribution strategy and improve service delivery, Managing Director, FBN Insurance Limited, Val Ojumah, has said.

    Ojumah, who spoke in Abeokuta, Ogun State capital, said the crash in crude oil prices was not new, noting that it occurred once in a decade.

    Speaking on non-oil sector and opportunities for insurance, Ojumah said insurance operators must note that economies usually go through a boom-gloom-recovery-boom cycle and as professionals, it behoves them to highlight key trends in each phase for strategic planning purposes “if they want to remain profitable and relevant in our line of business”.

    He said: Crash in crude oil prices is not a new phenomenon as this tends to happen at least once in a decade. Just as in the 80s, crude oil prices have declined from 2014 to 2016, triggering sustained fall in Nigeria’s GDP growth over the same period. Other economic indices too have shown the same decline.”

    He said tough times required smarter and more consumer-focused strategies, adding that one should either innovate or miss out.

    He urged the operators to re-evaluate their distribution strategy or remain stuck in yesterday.

    “Improve your services or lose out to competition. Execution may vary from company to company, but the basics are pretty the same,” he said.

  • NCRIB: govt, agencies can’t pay premium

    NCRIB: govt, agencies can’t pay premium

    As recession bites harder, many government agencies and parastatals are finding it difficult to pay their insurance premium promptly, Nigerian Council Of Registered Insurance Brokers (NCRIB) President, Kayode Okunoren, has said.

    He made this known at the August 2016 Edition of NCRIB members’ evening in Lagos.

    He said because many policy holders had jettisoned the renewal of their policies, there were no new businesses.

    The situation, he said, was made worse because government agencies and parastatals that are the highest insurance consumers were also not paying .

    The implication, according to him, was that there were no covers for most government agencies and parastatals.

    He said the “No Premium No Cover” policy must, however, be effected.

    He cited the recession, owing to sharp drop in the price of oil globally and high exchange rate, among others, as the reasons for decline in purchase of insurance policies in the country.

    Brokers, he said, should believe in the change policy of the government.

    Okunoren said: “Howbeit, I can see a bright light at end of the tunnel. I challenge you all at a time like this to be more innovative, in terms of product development and invent multiple streams of business ideas to weather the storm. It is not time to fold our arms and watch the pendulum swinging against us.

    “The brunt is being borne by both rich and poor. One of the worst hit sectors is the Insurance Industry. Nigeria runs a cash and carry economy, where insurance is often placed at the lowest ebb of scale of preference, if included at all.”