Investor apathy which hitherto pervaded the insurance sub-sector for many years has now become a big attraction for local and foreign investors out to maximise the gains and opportunities offered by the sector compared to other high risk investments, reports Bukola Aroloye
Like a new bride, the insurance sector has suddenly become the centre of attraction for many investors out there.
To many economic watchers out there this is indeed a very wonderful development and positive signs that things would begin to happen in a sector in time past that used to be considered a hard sell.
A new era beckons
The nation’s insurance sector has over the last three year remained toast of potential foreign investors. Consequently, the sector in 2015 witnessed influx of foreign players who deemed the market the best to play, especially at this period of economic crunch fueled in part by the dwindling oil receipts among others.
People power at play
The country is endowed with huge population in excess of 170 million, high rate of urban population and emerging middle-class which the sector continues to explore, these among others has made the sector remained the toast of investors, especially high portfolio global insurers over the last three years.
In a report by the National Insurance Commission (NAICOM) a number of new entrants especially foreign investors came into the sector last year.
Among the newcomers include: Liberty Group of South Africa, Prudential Life Company of UK among other 12 foreign firms, many of who became part of the domestic market in 2015 alone.
Upbeat, the former Commissioner for Insurance, Fola Daniel at a public forum recently observed that the Nigerian insurance industry was becoming so popular not only in Nigeria but across Africa that it has occupied the second position in Africa from the fifth position it occupied between 2012 and 2013.
Also Foreign Direct Investment (FDI) attracted by the insurance sector in the last one year was estimated at been put about $750 million.
The major driver behind the significant investment is traceable to the decision by the Central Bank of Nigeria (CBN) to reverse universal banking licenses, which forced banks to divest insurance subsidiaries unless they opt for the holding company structure.
In August 2010, the CBN directed banks under its supervision to divest from their subsidiaries including insurance companies to enable them concentrate on their core banking business.
In the alternative, they were asked to set up holding companies and bring all their subsidiaries under this umbrella.
Investigation by The Nation revealed that most of the leading global insurance companies have either acquired or bought substantial equity of some Nigerian insurance firms in the last six months, a move experts say is strategic given growing middle class. A breakdown of the acquisitions showed that South Africa’s giant, Old Mutual, took over Oceanic Insurance, Sanlam Insurance bought FBN Life Assurance, NSIA Participations took over ADIC Insurance and Greenoaks Global Holdings acquired Union Assurance.
It may be recalled that only recently, France’s Axa announced that it had acquired a 77 per cent interest in Mansard Insurance, formerly GTAssurance, for €198million.
Analysts at FBN Capital stressed that global underwriters are trooping to Nigeria because of the positive demographics and rising household incomes across Africa, sometimes dressed up as the emergence of the middle class.
“The new national accounts with a base year of 2010 were helpful in this respect. The same investment rationale can be applied to banks, retail, telecoms, and consumer goods manufacturing and advertising,” they said.
The analysts added that South Africa’s Sanlam views Nigeria as one of its star markets in Africa.
They cited figures showing that insurance penetration stands at about 10 per cent in South Africa yet less than two per cent in Nigeria.
“Foreign companies can own insurance firms in full, and we can see their becoming the dominant players in the industry within this decade. This is obviously not the case with banking, “they said.
A report by NAICOM also showed that the sector recorded a total of N258billion in gross premium income for 2013 and expects N1trillion for 2018.
Sectors growth/performance
The sector has in the recent time recorded some growth, though it is yet to get at the expected high.
But experts in the sector were of the view that the entrant of these icons will engender healthy competition within the industry which will in turn promote growth.
According to NAICOM admitting credible foreign investors into the market will not only engender growth but will assist the government to tackle unemployment challenges in the country.
As at the end of first quarter, 2015, the Nigerian insurance industry total asset has risen to N793.6 billion while the total premium as at the end of 2014 according to NAICOM stood at N302billion.
The sector in the same first quarter of 2015 recorded gross premium income to the tune of N97.017billion compared to the N302.105billion written in the whole of 2014, thus positioning the sector for further growth.
This figure indicates a growth rate of about 28 per cent considering the average N75.5 billion quarterly premium recorded in 2014.
Major events in 2015
The review of activities in the insurance industry in 2015 will be incomplete without highlighting some of the milestones recorded.
Specifically, NAICOM, within the period inaugurated fourteen insurance companies to operate the Technical Management Board of the Energy and Allied Risks Insurance Pool of Nigeria (EAIPN).
The companies include: Leadway Assurance Company limited, Custodian & Allied Insurance Plc, Aiico Insurance Plc, Lasaco Assurance Plc, Royal Exchange Insurance Co. Ltd, Consolidated Hallmark Insurance Plc, and Sovereign Trust Insurance Plc.
Others are Linkage Assurance Plc, Industrial And General Insurance Plc, Nigerian Agric Insurance Corporation (NAIC), Sterling Assurance Company Limited, Prestige Assurance Plc, NEM Insurance Plc and NSIA Insurance.
In the same vein, the Chartered Insurance Institute of Nigeria, CIIN, within the period changed mantle of leadership as Lady Isioma Chukwuma emerged the new president following the completion of office of the former president of the council, Mr Bola Temowo.
Delivering her acceptance speech at her investiture ceremony, Chukwuma said that her administration will focus on promoting insurance awareness by increasing the visibility of insurance in national consciousness.
The year as well witnessed the investiture of Kayode Okunoren as 18th president of Nigeria Council of Registered Insurance Brokers (NCRIB).
Okunoren while unveiling his nine-point agenda, which according to him would take the broking sector to lofty heights, stressing that he would be committed to taking insurance broking practice and the NCRIB higher than he met them.
NCRIB within the period continued to intensify effort aimed at driving out fake insurance brokers practicing in the country while NAICOM has never relented in creating enabling environment for the sector, which will in turn promote insurance business in country to enhance penetration and patronage.
Mergers and acquisition in the sector
Before the period under review, companies including Old Mutual, NSIA, Metropolitan Life, Sanlam, Greenoaks and AXA have established their presence in Nigeria through acquisition and partnerships, and this analysts believe have started recording significant impact on the market.
Old Mutual, one of Africa’s biggest insurers headquartered in the United Kingdom acquired had 70 per cent stake in Oceanic Life Insurance Limited, AXA, a France based world renowned insurance group, acquired majority shares in Mansard Insurance. Group NSIA, a company based in Abidjan, Cote d’Ivoire, bought 96.15 per cent equity of Diamond Bank Plc in ADIC Insurance Company Limited.
Sanlam Emerging Markets, a group of South Africa-based investors, bought 35 per cent stake in FBN Life Assurance Limited with First Bank of Nigeria Plc owning the remaining 65 per cent among others.
On the merger side, Custodian and Allied Insurance Plc have merged with Crusader (Nigeria) Plc having secured the nod of their shareholders through the court, while FBN Life recently concluded acquisition of Oasis Insurance, now, FBN Insurance, underwriting both life and non life business.
Cornerstone Insurance and Fin Insurance have done theirs half way. The merger became necessary according to operators to equip local players ample opportunity needed for development of capacity to ensure favorable competition.
Growth strategies/prospects for 2016
Experts hinged the growth of insurance industry to right product, innovation and healthy competition between local players and their foreign counterparts. Thus they are optimistic that the presence of foreign insurers in the Nigerian market would in no distant time impact on penetration and service delivery.
The former President, CIIN and chairman, Insurance Industry Consultative Forum, Bola Temowo, stated that the industry was poised at addressing many of the challenges facing the sector in order to sustain current development in the market that has attracted the attention of many foreign investors.
“Our market is growing and becoming the goldmine people outside our jurisdiction have noticed, and we must do everything to sustain this growth,” said Temowo.
