Tuesday, April 27, 2010

'Adherence to market agreement will grow insurance industry' - Dr. Justus Uranta, MD/CEO, Niger Insurance Plc.

Insurance industry in Q1

This first quarter  to me is the most trying period because it is the time we had expected that the economic meltdown, which lingered through the previous year was going to show sign of recovery. Much as the prices of stocks in the capital market  are begining to show signs of recovery, remember that the budget was not  out yet for  implementation  and that is a big minus,  and normally, it throws most companies into some level of distability because most time organisations rely on the budget  to know what step to take.

But having said this, with our own little experience here in Niger, we have been able to drive our business to about a billion naira income though not up to our expectation. But I am also hoping like any other well-meaning Nigeria that with the visit of our President to United States and his discussion with the American president from where we have also heard from the grape vine that Nigeria is going to be de-listed from the dangerous list of terrorists. I mean, these are positive signs that things can only but get better, that is our only hope. But as it is at the moment, we cannot see any serious signs apart  from slight increases in shares prices.

Expectation in Q2.

Like I said earlier,if this quarter can witness approvals and implementation of provisions of  the budget, naturally one would expect that things will pick up. I want to believe that improvement of the economy is factored into this budget and so as soon as it is released, funds will begin to flow around. Monies will start to circulate in the economy, there will be availability of funds, access to credit will improve and that is where our hope lies.

Criticism of recapitalisation.

Well I do not know what they mean when they say the insurance industry recapitalisation did not meet its expectations.When you want to look at insurance business, you must look at the perculiarities which makes it different from other sectors. what do I mean by this?, In insurance, we have lot of factors that play in the business which enables us meet our primary obligation of efficient settlement of claims and that is reinsurance, treaties and all that.

So when we say insurance companies have N5 billion, it means we also have backing from reinsurance, securities, both local and international. So you do not look at figures strictly, because there are other things that support our operations that people do not see and that even makes it  difficult to even say whether this figure is adequate or not. But fundamentally, every business enterprise needs money to enable it succeed to buy facilities to deliver efficient service and also do more research.However, we are yet to see how the National Insurance Commission (NAICOM) would come up with the analysis that will encourage them to ask us to provide more, in terms of our capital base.

Income and capital base.

I will say our income at the moment justifies our capital base because one important thing most of us operators run away from is research and this requires a lot of funding. In the product market, a lot of money is spent on research and you will be surprised that after spending close to N20 million or more, the product may not meet the taste of end users, so you jettison that and start afresh.

You can only do that when you have a strong capital base. If an insurance company with N2 billion capital base spends about one quarter of that on research over time, then you will see that their bottom line is eroded so much that could impact negatively on their operations.

So, beyond that, you will also need to establish visible branch outlets that can convince people that this company is ready and means well. Again, you need to train and retrain your manpower.

Today's business is knowledge -driven, so, you need to train  and retrain your manpower  to be able to compete globally having seen that the world has become a global village.  As it is today, there is no difference between those of us operating in Nigeria and our counterparts in London if we are able to drive our knowledge some where close to their point. So, we need this funding to improve on our bottom line.

Universal banking and the industry.

Before now, we in the insurance industry had seen  the universal banking  as it were, as somewhat of an incursion into our core area of operation by the banks. But most of us, in order not to sit down and be beaten hands down decided to brace it in many forms.

Like in Niger insurance, we went into alliance with Afribank and it has been working up to the time the Central Bank of Nigeria intervened and brought in a new management to run the bank and gave them specific instructions and directives which is exclusive of all these alliances.

But even at that, it's still working to an extent. So largely, it will be a welcome development as long as insurance companies are concerned  because as soon as banks get their hands off our core operations in term of insurance coverage,a large chunk of such business will be returned to us and it will add value to  what we do.

And we expect to will add to our gross premium income.

Premium management and improved remittance.

Largely 'no premuim no cover' is not a new law in Nigeria neither is it a new regulation but the same law establishing insurance practice also gave some leeway to established brokers to the extent that they are allowed up to 30 days within which to remit premium. But I think by and large, the market has embraced the NAICOM directive on remittance, though I cant say significantly that this is the outcome yet. But I think it's being subjected  to trial and we are hoping that it would help our industry.

Industry and market agreement

I would be happy to see my fellow operators adhere strictly to this market agreement because it is going to help us; it's going to help the market grow; its going to bring down the huge premium indebtedness in our books which compel us  to make this heavy provisioning.

Again, it's also going  to create a level playing field that will make us compete  healthily and at the end of the day it will make the practice better and more beneficial to the end users. Therefore, my emphasis here is that, please let all operators try and adhere strictly  to this market agreement because it is going to launder our image and put us on a better light before the insuring public and at the end of the day put money in our pocket. So, let us make it work.

Strong financial base.

Niger Insurance Plc was initially established as Yorkshire Insurance Company limited, a British owned insurance company in 1962. But it is now  a  fully privatised Composite Insurance Company quoted  on the floor of Nigerian Stock Exchange. Niger ranks amongst the financially solid first generation insurance companies with an asset base of over N15billion.

Claims payment and Premium income.

The current global meltdown is a reality that all individuals and businesses alike have had to face,Insurance companies inclusive.We all are aware of the financial implications of this reality and the need to maintain an effective financial management to be able to weather this storm. Despite this situation, Niger Insurance Plc has successfully maintained it core operations of risk bearing and claims settlement due to our financial stability and operational efficiency.

Niger Insurance paid claims of N1billion in 2009 representing 15 percent increase from 2008 figures, and generated a premium income of over N6.6billion representing 25 percent increase from 2008 figures. Underwriting profits rose from N2.4billion in 2008 to N3.4billion in 2009 representing over 40 percent increase.Consequently we have continued to sustain customers' confidence over the years.

However, this result is also without prejudice to board's decisions. different provisioning as may be required by the market regulatory authority which, of course will affect the bottom line.   

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