The continuous desire by foreign insurance investors to do business in Nigeria through the acquisition of stakes in local firms gives credibility to presence of huge and untapped insurance potential in the country. Sunday Ojeme reports
Nigeria, as at today, remains one of the countries with some level of political instabilities within the African continent.
Although with a semblance of stable governance, which is invariably desired for investment, the underlying political turbulence also has a lot to do with investors’ decision to either put their money in the economy or not.
Since confidence in an economy goes beyond resources that are available to include stable socio-political environment, Nigeria should count itself lucky as some investors still consider it a place to put in their funds, despite the presence of insecurity and, to some extent, unfavourable business policies.
Even while insurgency has dealt a blow on the economy in some parts of the country, coupled with brewing political tension, some foreign investors still find reasons to ply their trade within.
The insurance sector, among some others, has been lucky in this regard. Although the industry appears to be on the negative due primarily to widespread apathy and poorly run economy, foreign investors are looking beyond what is currently obtainable to find their way and tap into the huge potential.
For a country with an estimated population of 180 million people and diverse economic possibilities spanning oil and gas, construction, solid minerals, agriculture, information technology, automobile industry and much more, resourceful underwriting experts have no choice than to having their teeth on the pie, no matter how little, as the expected benefits in all segments would manifest very shortly.
According to reports by KPMG, despite the opportunities abounding in the country, insurance penetration in Nigeria, as measured as a percentage of premiums to gross domestic product, was 0.68 per cent in 2012.
That compares with a 3.5 per cent average for Africa and 15.4 per cent in South Africa, the continent’s biggest insurance market, according to figures from PriceWaterhouseCoopers in the same year.
Besides foreigners that had made inroads into the system in the last six years and beyond, the recent entrance of one of the biggest financial and asset management firms in the world, Allianz Group, speaks volume of the huge potential in the country.
As good as the elements attracting the investors may appear, good governance, no doubt, remains a major factor to complete the process.
For instance, when France’s AXA announced its acquisition of 77 per cent interest in Mansard Insurance for €198 million, the Head of Axa Global Property and Casualty Business, Jean-Laurent Granier, while making reference to the previous election process, said: “We think that political stability and the respect of democratic rules in this vote can only consolidate development potential in Nigeria and other African countries.
“We are not making a political interpretation of this outcome. This reinforces and confirms our will to grow in Nigeria.”
AXA is not the first foreign entrant into the Nigerian market in recent time. It joined Old Mutual with the acquisition of (Oceanic Insurance), Sanlam of South Africa bought into (FBN Life Assurance), NSIA participation in (ADIC Insurance) and Greenoaks Global Holdings also bought into (Union Assurance) before eventual emergence of Allianz into the scene that changed its identity from Ensure to Allianz Nigeria Insurance Plc.
Axa had disposed of 8.9 billion euros ($9.7 billion) of assets in developed markets since 2010 to invest in faster-growing nations, including African markets. It also completed the purchase of a 7.2 per cent stake in pan-African reinsurer, Africa Re, which is headquartered in Nigeria for $61 million.
Insurance premiums tend to increase faster than economic growth in Nigeria and African countries, as companies and households adjust their coverage to “catch up” with rising living standards, Granier said.
“The corporate insurance market was first to develop and now the market for individuals is opening,” he said. Health insurance products sold through corporate or individual policies, car-insurance needs and micro-insurance initiatives are contributing to insurance expansion in Nigeria, as in other fast-growing African markets, he said.
On its part, South Africa’s Sanlam views Nigeria as one of its star markets in Africa, noting that the operation achieved breakeven after little more than two years. It cited figures showing that insurance penetration stands at about 10 per cent in South Africa yet less than two per cent in Nigeria.
According to Granier in 2014, Mansard increased its annual revenue by more than 20 per cent in “these last years and this company can keep having high growth.”
He also maintained that AxA’s stake in Africa Re would allow Axa to get a more complete understanding on insurance markets’ evolutions across the whole continent, adding that “we’re selecting places where we want to go because we think a country has critical size and is ready for development of insurance.
For Allianz, the Managing Director, Allianz Nigeria Insurance Plc, Mr Sunkanmi Adekeye, had described the entrance of Allianz Group into Nigeria through the insurance company as a major milestone for long-term growth strategy on the African continent.
In Africa, Allianz is currently in 17 countries and accompanies clients in 39 countries.
Speaking at the unveiling of the brand in Lagos, he noted that in the nearly two decades of this century, Nigeria had witnessed significant population growth and a rapid transformation in the areas of financial services provision, digital disruption, telecommunication, and accessibility to the internet, adding that as Africa’s most populous nation, Nigeria represents the power-house of human capital on the continent and is one of the most dynamic economies in Africa.
“By launching in Nigeria, Allianz gains full access to this key insurance market in Africa, and this marks a major milestone for Allianz long-term growth strategy on the continent. This new step of development, will allow us to contribute to offering the best products and services to Nigerian customers in both personal and commercial lines. We are optimistic about the limitless potential of this future growth market.” Adekeye said.
Allianz Nigeria is reputed for strong management team from diverse backgrounds with an average of 10 years’ experience in financial services sector; made up of young and dynamic workforce with highly experienced board of directors.
Describing the entrance as germane to the growth of the insurance industry and the nation’s economy at large, Adekeye said Allianz currently offered micro-insurance solutions to 500,000 low-income households on the continent, stressing that “this is a business opportunity we look forward to exploiting in full.”
To consolidate its hold in the market, the underwriting firm will delve into contemporary risk for businesses in the area of cyber security, as it will look more closely into cyber liability insurance (CLIC) coverage in this fast growing market.
“The fact is that P/C insurance remains the single largest source of profit. It is also the segment where we currently see the largest upside. Therefore, operating profit from P/C should grow disproportionately at around five per cent per year – based on an ambitious target for the combined ratio of 95 per cent driven in particular by productive improvements that lower the expense ratio.
“Efficient use of shareholders’ equity as part of our capital management demands that we make significant investments to grow this profitable line of business,” he said.
To consolidate on the current narrative in the sector, the Federal Government, through the industry regulator, National Insurance Commission (NAICOM), must continue with whatever it is doing to attract more hands into the sector.