May 29, (THEWILL) – Despite the sluggish performance of the insurance sector in 2021, directors of five major insurance firms earned a 45 percent pay rise during the year, while shareholders’ dividend payout remained static. Nigeria’s 10 largest insurance firms by market capitalisation have a total of N148.5 billion; but this report focuses on the top five that have published their 2021 audited report. They are Custodian Investment Plc, AIICO Insurance Plc, Cornerstone Insurance Plc, Linkage Assurance Plc and Prestige Insurance Plc.
The 2021 audited results of the five top insurance firms showed a mixed fortune for the financial services insurance sub-sector at the time of filing this report. This, apparently, reflects the sluggish recovery from the COVID-19 pandemic and the two recessions which hit the economy – the worst in a quarter of a century, in the previous years.
Recovering from the stunted growth recorded since it contracted 2.9 percent in 2019, the Nigerian insurance sector achieved a negative 15.3 percent growth in 2020 according to the National Bureau of Statistics (NBS). In terms of global relevance, the Nigerian insurance sector lagged significantly with a total contribution to global premiums at 0.03 per cent as it ranks 63rd of 88 countries profiled by Sigma Research in 2019.
The development reconfigured the top- and bottom-lines performance trajectory of the firms, with the directors’ total remuneration hitting N1.39 billion, a 45 percent rise from N956 million recorded in the preceding year.
Data from the 2021 audited annual report of the profiled companies showed that Directors of Custodian Insurance Plc, the largest insurance firm with N38.2 billion market capitalization, earned total remuneration of N987.97 million, representing 82.5 percent rise from N5341.33 million they received in the previous year. In the case of AIICO Insurance Plc with the second largest market capitalization of N24.5 billion, the Directors’ remuneration jumped slightly from N290.88 million in 2020 to N295.39 million in 2021, reflecting a 1.5 percent increase.
A newspaper report had disclosed that the total emolument of N290.8 million received by Directors of AIICO Insurance Plc in 2020, the year that COVID-19 spread human suffering and destabilized global economy in the worst dimension in a century, was the highest remuneration paid its Directors since 1990 when AIICO Insurance was listed on the Nigerian Exchange as a public limited company. It was established in 1963 as a private enterprise.
Directors of Cornerstone Insurance Plc went home with a total remuneration of N41.98 million, 41 percent drop from the N71.20 million they enjoyed in the previous financial year. The story was slightly different at Linkage Assurance Plc where the firm’s Directors received a total remuneration of N38.71 million, representing 14.29 percent rise from N33.87 million they were paid in the year before. Prestige Insurance Directors’ total remuneration jumped by 17 percent to N21.57 million from N18.50 million in the preceding year.
The five top insurance firms recorded a total of N179.16 billion as Gross Premium Written in 2021 compared with N152.98 billion in 2020, representing 17.12 percent increase. Total profit before tax (PBT) recorded by the five top insurance companies in 2021 was N15.68 billion compared with N23.3 billion in 2020, a drop of 33 percent. Total profit after tax (PAT) recorded by the five surveyed insurance firms was flat at N23 billion and N23.17 billion for 2021 and 2020 respectively.
The five insurance companies’ combined total assets was N586.72 billion in 2021 from N515.43 billion in 2020, reflecting an increase of 13.84 percent. Experts ascribe the slight growth to the lull in the industry as it battles against the headwinds of COVID-19 and the two occasions of recession in 2016 and 2020.
An insurance practitioner, Joe Agada, said the insurance sector is still under pressure from a challenging operating environment, unfavourable government policies and unprofessional conduct of some practitioners. “Even the directors are making sacrifices because the industry is under pressure from every front and to run insurance business in this clime is very difficult,” Agada told New Fortunes in a note.
The International Association of Insurance Supervisors, IAIS (a voluntary membership organisation of insurance supervisors from over 190 jurisdictions constituting 97 percent of the world’s insurance premiums) reported that lower premiums, on the back of reduced economic activities, coupled with lower investment income pressured the profitability of insurers in 2020.
“Data as of Q2:2020 also showed that solvency ratios declined on an aggregate level across business lines and regions resulting from investment losses that accrued from financial market volatility during the period. Lower profitability, increased claim payments, and declines in asset values as a result of financial market volatility have forced some insurers to discontinue some pandemic-related insurance policies and remove clauses that expose insurers to pandemic-related claims in existing policies in order to contain claims,” IAIS stated.
Custodian Investment, AIICO Insurance and Cornerstone Insurance each declared a N0.50 dividend per 50 kobo share in 2021. Prestige Assurance declared N1.50 per 50 kobo share.
The insurance sector has remained vulnerable to the volatility in the economy making the number of uninsured Nigerians among the world’s largest within prospective insurance markets. According to the National Insurance Commission (NAICOM), this is as a result of its inability to enforce the compulsory insurance laws and lack of cooperation among insurance operators in the country.
The Commissioner for Insurance, Sunday Thomas had in January this year said the apex insurance regulator would intensify its plans on different policies and initiatives to deepen insurance penetration thereby ensuring that more Nigerians and assets are insured. He was optimistic that the N1 trillion target set for using the Market Development and Restructuring Initiative (MDRI) goals initiative will be met. This is not minding the challenges before the regulator in whipping the operators into line, ensuring that all claims including COVID-19 and #EndSars are paid.
Other objectives for the commission this year, Thomas said, include consolidating the sector’s capital, Human Capital Development, Financial Inclusion, Bancassurance initiative, Life Annuity, New Insurance Law, African Continental Free Trade Agreement (AfCFTA), improving efficiency in the supervisory processes, among others.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
