Niger Insurance Plc, like its peers, is grappling with reduced premium growth due to challenging operating environment. Chris Ugwu writes
Despite the recapitalisation of insurance firms in 2007, the sector has continued to struggle with challenges such as dearth of appropriate human capital and professional skills, poor returns on investment, existence of too many fringe players and poor asset quality.
Other challenges include prominence of unethical practices, significant corporate governance issues, insurance premium flight, poor business infrastructural facilities, especially in the area of ICT and lack of innovation in product development. Also included are lack of awareness on the part of consumers on the uses/suitability of insurance products, low gross domestic product (GDP), per capita figures and poor corporate governance structures.
Notwithstanding that Nigeria is under daily threat from not only risks emanating from natural disasters such as floods and rainstorms, but also man-made risks such as security, Boko Haram, kidnapping and other heinous crimes, which are more compelling reasons why insurance should grow, penetration still remained a huge challenge, with some having to do with the culture and the general mind-set of people to insurance.
This negative perception that trailed the sub-sector has retarded the growth of insurance leading to the inability of majority of companies in the industry to pay dividend to shareholders for many years.
Market watchers attributed the inability of the sub-sector to rise above the nominal level to crisis of confidence. Besides, the few ones that raised high expectation for good results ended up reporting negative financial results.
Niger Insurance Plc is one of such companies that have got its fair share from the dwindling fortune of the sub-sector as the movement of its share price has remained below 50 kobo, courtesy of new price methodology that was implemented early this year.
The group, which had ended the financial year 2016 on decline as the harsh operating environment continued to hurt earnings, also began the 2017 on the downswing and snowballed to negative position to end the 2017 financial year in a loss.
However, the extensive economic crisis has seen the company along with other insurance participants badly beaten and a downward spiral mirroring the market has been the fate of Niger Insurance whose share price had dropped to paltry sum of 26 kobo.
The share price, which closed at 50 kobo per share in July 2017, fell by 48 per cent or 24 kobo in value. At close of business last Friday, the company’s share price stood at 26 kobo year to date.
Niger Insurance ended the financial year on the downside as it posted 87 per cent decline in profit before tax for the full year ended December 31, 2016. Its pretax earnings during the period under review dropped to N99.045 million from N736.029 million posted during the comparable period of 2015.
However, gross premium written dropped by 43 per cent to N5.962 billion in contrast to N10.496 billion posted in 2015.
Operating profit transferred to general reserve stood N42.134 million in 2016 from N600.911 million reported in 2015, representing a drop of 93 per cent.
The underwriting firm began its first quarter of the year, which ended on March 31, 2017 with profit after tax dropping to N139 million from N158.5 million achieved in the corresponding period of 2016.
Also, its net operating profit before tax stood at N146.5 million as at March 31, 2017, versus N165 million a year ago.
It was a similar situation for the insurance firm’s net premium income, which closed at N1.47 billion on March 31, 2017, in contrast to N1.99 billion 12 months ago.
In the financial statements, Niger Insurance Plc said its net cash outflow from investing activities was N81 million compared with the N105.6 million losses declared in the corresponding period of 2016.
The firm posted 1.97 per cent drop in profit after tax for the half year ended June 30, 2017. It’s net earnings during the period under review dropped to N215.167 million from N219.501 million posted during the comparable period of 2016.
However, profit before tax grew by 15.3 per cent to N262.534 million against N227.678 million recorded a year earlier.
Gross premium written rose by 86.66 per cent to N6.188 billion in contrast to N3.315 billion posted in 2016.
However, the insurance firm reported a profit after tax of N148.718 million for the third quarter ended September 2017 as against a loss before tax of N654.843 million in 2016.
Profit before tax stood at N134.930 million during the period under review as against pretax loss of N634.862 million a year earlier.
Nevertheless, gross premium written dropped by 36.18 per cent to close at N947.990 million as against N1.291 billion in 2016.
Niger Insurance ended the full year 2017 on the negative, posting a pre-tax loss of N927.433 million for the full year ended December 31, 2017.
The company in a filing with the Nigerian Stock Exchange (NSE), said its loss before tax during the period under review stood at N927.433 million from profit before tax of N99.045 million posted during the comparable period of 2016, accounting for a percentage change of 1,036.
Operating profit transferred to general reserve stood at -N978.926 million from +N42.134 million in 2016.
But gross premium written leapt by 44 per cent to N8.585 billion in contrast to N5.962 billion posted a year earlier.
Chairman, Niger Insurance, Yusuf Abubakar, had while presenting the company’s score card to the shareholders at an annual general meeting (AGM), noted that the insurance firm lost a major Federal Government account as a result of the transfer of the Deposit Administration Schemes to a designated Federal Government agency in full implementation of Pension Reform Act 2004.
Abubakar explained that the downward movement in the performance of the company was as a result of discontinuation in underwriting of the deposit administration scheme and the application of relevant assets to settle substantial part of the liabilities thereof.
Speaking also at the 47th annual general meeting (AGM), Abubakar said certain factors including shrinking federal/ state governments’ revenues, unavoidable devaluation of the Naira and high energy cost resulting in inflationary landscape, access to forex by businesses and individuals. All these, he explained, worked together to make things tough for the industry during the period under review.
On how the Niger Insurance group fared in the face of these, Abubakar said: “Despite challenging economic indices, the group delivered a modest performance in 2016 with the overall result reflecting a fairly strong and sustainable company built on solid fundamentals indicating that strict implementation of its strategic initiatives will take it to greater heights.”
He said the company, during the period, managed to break even as a result of its prudent underwriting management.
On the future outlook of the company, the Niger Insurance boss, said the company’s management, would ride on the van of various economic growth strategies and positive policies and efforts of the National Insurance Commission (NAICOM) especially the enforcement of compulsory insurances to grow the company in the current year.
“We will navigate the path to meet our medium -term business strategies and retain our ability to deliver value creation to our shareholders. Our main focus shall be to enlarge our customer base and enrich our customers by proving more value-added products in a faster and more efficient manner following recent regulatory proclamation. The company, is now set and poised for the sale of annuity insurance,” he said.
He also said the capital raising project of the company is ongoing, adding that this has become more apt in view of the pending adoption by NAICOM of the risk based supervision.
“The regulator has muted the idea of imminent mergers and acquisition in the industry, strong capital base will put your company in better stead to underwrite more business thereby creating more value to shareholders,” he said.
For the insurance sector to experience positive growth, the industry should embrace changes in business environment, which presents uncommon opportunities to deepen penetration of the market through creativity and ingenuity.