Why investors are
scrambling for insurance stocks – Wale Onaolapo, Managing
Director, Sovereign Trust Insurance
By LOUIS IBA
Monday, March 31, 2008
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Onaolapo
Photo: Sun News Publishing |
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The recent high demand for insurance stocks on the floor
of the Nigerian Stock Exchange (NSE) by investors has been
a source of joy to many insurance operators who scaled through
the recapitalisation of the sector early 2007.
Managing Director, Sovereign Trust Insurance (SIT) Plc, Mr.
Wale Onaolapo, said the trend offers a lot of hope for a better
future not only to operators but to investors and the Nigerian
economy as well.
In an exclusive interview in his Lagos office, Onaolapo, commended
the government’s vision in ordering the reforms of the
sector.
The reforms, he said, had separated the men from the boys
as only serious companies were now playing in the industry.
“There is a significant improvement in the number of
serious players in the sector.
Before the recapitalisation and consolidation of the sector,
the number of insurance firms in the Nigerian Stock Exchange
(NSE) was very minimal, just about 20, but the reforms ensured
that so many firms got listed in NSE in order to source for
funds and meet the new capital requirement,” he said.
Onaolapo said the process of implementing the reforms had
also culminated in the creation of awareness on the opportunities
the sector offers to investors.
According to him, it is this increased awareness, and the
new capitalisation which has allowed operators to expand their
businesses with good profit returns for investors that have
led to the hot demand for insurance stocks on the floor of
the Nigerian Stock Exchange.
“The reforms of the insurance sector not only increased
the capital of insurance firms and made them stronger, but
the process also created awareness for many people, especially
the insuring public.
“People now know about the opportunities in the insurance
sector, especially investors. And, therefore, the change in
the performance of insurance firms on the Stock Exchange is
informed by the perceived opportunity that now exists in the
insurance industry or business in Nigeria,” he said.
Onaolapo, who joined STI as pioneer staff and was named Managing
Director last month is a chartered insurer, who also holds
an MBA with specialization in Marketing Management from Lagos
State University. Onaolapo is also an Associate of the Chartered
Insurance Institute in London and has over 25 years insurance
experience, involving both insurance broking and underwriting.
In this interview, he spoke about his vision for the company.
Excerpts:
About STI
Sovereign Trust Insurance Plc commenced business in 1995 as
a limited liability company and is today listed on the Nigerian
Stock Exchange. It is one of the fastest growing insurance
companies in Nigeria and the West African sub-region.
The company aims at becoming one of the top five in the insurance
sector within the shortest possible time. To achieve this
target, conscious effort is being made to expand the branch
network nationwide to afford Nigerians qualitative insurance
products and services.
The company’s Gross Premium rose from N40 million in
1995 to over N2.5 billion in 2007, while its paid up share
capital which was N20 million in 1995 has gone up to N2 billion
as at the end of 2007. Total assets rose from N47 million
in 1995 to over N4 billion in 2007 just as total claims admitted
and paid during year 2007 amounted to over N470 million. The
staff strength has risen from 42 in 1995 to 156.
The company boasts a team of astute, innovative and well-committed
professionals both at the top and middle management levels.
The company also continued to shoulder its corporate social
responsibility tasks creditably. It presented its competitors
a great poser with its determination to sponsor the DAME Journalist
of the Year Awards in the insurance category. It entered into
agreement with Diamond Publications, organisers of the Annual
Diamond Awards for Media Excellence (DAME) on the sponsorship
of the award. DAME Award provides a platform for promoting
healthy professional competition among journalists.
Before then, STI was the official insurer and sponsor of the
Team Nigeria to the 2007 All Africa games in Algeria, an arrangement
involving sponsorship and insurance protection for every member
of the team, including coaches, team officials and representatives
of various sports authorities and staff of relevant sports
organisations who were part of the Team Nigeria contingent.
The company provided Group Personal Accident cover for 811
persons under this arrangement. The Group’s personal
accident cover was for two months between June 1, 2007 and
July 31, 2007 when the event took place and it covered members
of the Team Nigeria all the way from Nigeria to Algeria and
back home.
Sovereign Trust Insurance Plc (STI) as now constituted is
the product of a combination between the original Sovereign
Trust Insurance Plc, Confidence Insurance Plc, Coral International
Insurance Company Limited and Prime Trust Insurance Company
Limited. These companies merged their operations as part of
efforts geared towards scaling the N3 billion recapitalisation
hurdle set for non-life risk underwriting companies by the
Federal Government.
The economy
The Nigerian economy from all available indices is really
picking up. Government has done a lot with its drive to improve
on the economy especially with its vision of growing the economy
through Foreign Direct Investment (FDI). And there has been
significant flow of FDI into the country in the last couple
of years.
The banking sector has also been reformed and is now contributing
and playing more significant role in the nation’s economic
development. And other sector such as the telecoms sector
is doing very well and is assisting businesses. Other sectors
are also doing fine and posting good profits. But for the
insurance industry, we expect that the industry will key into
this new development in the economic restructuring of the
country and play a significant role in the economy. The reforms
of the insurance sector have equally boosted the chances of
insurance operators to contribute to the growth and development
of Nigeria’s economy. For now, I see a very good opportunity
in the landscape. The capital base has increased from about
N30billion before the recapitalisation to about N200billion
now. So, with this strong financial base, the insurance industry
is positioned to offer significant value to the nation’s
economy.
The rush for insurance stocks
There is a significant improvement in the number of serious
players in the sector. Before the recapitalisation and consolidation
of the sector, the number of insurance firms in the Nigerian
Stock Exchange (NSE) was very minimal, about 20, but the reforms
ensured that so many firms got listed in the NSE in order
to source for funds and meet the new capital requirement.
But you must also note that the reforms of the insurance sector
not only increased the capital of insurance firms and made
them stronger, but the process also created awareness for
many people, especially the insuring public.
People now know about opportunities in the insurance
sector, especially investors.
And, therefore, the change in the performance of insurance
firms on the stock exchange is informed by the perceived opportunity
that now exists in the insurance industry or business in Nigeria.
With very strong capital base, projects that were impossible
to pursue prior to the reforms are now possible to embark
upon. For instance, operators now have the resources to penetrate
the market the more and extend their services to all nooks
and crannies of the country with more branches. They have
the wherewithal to launch even beyond Nigeria into the West
African coast by way of new branches. So, what you are now
witnessing in the stock exchange as the increase in the demand
for insurance stocks is a reflection of the potentialities
that investors have seen in the industry and are tapping into
it.
You will also observe even from the publication of results
from the insurance companies that are quoted on the stock
exchange – that is the quarterly performance or returns
that are being rendered – that the profit performance
of insurance companies actuality increased over previous years
performance. I have not seen any insurance company that posted
less than 50 per cent improvement on its previous year’s
performance in terms of profitability. I have not seen one.
The story has changed. And there are lots of opportunities
for insurance businesses now in Nigeria.
One of them is in the oil and gas sector. Remember the government
has come out with the local content policy, which mandates
all companies in the oil and gas sector to insure their assets
and businesses through Nigerian insurance firms. Before now,
this avenue was in leakage in terms of business generation
for Nigerian insurance companies.
If you have noticed, the little implementation that has been
done on this policy had led to a significant income for insurance
firms and this is a source of where revenue will flow in for
us. Definitely, it will impact on the profit levels of insurance
companies. Besides, insurance companies are re-strategizing;
they are reaching out to a lot of people who are not embracing
insurance in the country. They are creating awareness and
the result is that the confidence level of the people on taking
insurance is increasing daily.
Need to review market approach
But what is done is still not enough. We have a lot of untapped
market in Nigeria. And at the root of why many Nigerians are
not taking up insurance is ignorance. Many Nigerians don’t
understand what insurance is all about and understanding the
business is very important. It will be wrong to patronise
a product that you don’t understand.
So, we have a lot of work to do; we have to really be committed
to serious enlightenment and education of the public on what
insurance is all about, especially its benefits to policy
holders.
From my perspective, I believe very strongly that insurance
operators in Nigeria need to do something fast about their
marketing approach. It’s important. I feel the industry
as a whole or a majority of the players in the industry would
have to come together, sit and re-strategize on their marketing
activities, so that more awareness could be created about
insurance in the country.
It is a serious issue because there is a lot to be done in
the area of advertising and branding by operators. There is
the need also to reach out to the people the more through
the media – radio, TV, magazines, newspapers. I believe
if this sort of campaign is enhanced and sustained, majority
of Nigerians will understand what insurance stands for and
begin to embrace it. You can’t move an economy and its
people without them embracing insurance. Insurance allows
you to do a lot of things because you are not afraid, as someone
is there to indemnify you.
Insurance is a futuristic thing. People should know they need
to protect themselves, their families and the future of their
children, their assets and wealth. This message needs to be
put across to the Nigerian populace. I don’t think a
lot of insurance companies are doing enough in this regard.
Today, most insurance companies in Nigeria are well capitalized
and they have the ability to sustain the campaign and awareness
project. And I believe in the course of the year, people will
begin to see more of the campaigns in the country.
But it is not only the marketing aspect that has to be addressed.
Operators must also address the issue of products that are
pushed to the market to ensure that they are relevant to the
needs of the people. In the past couple of years, most insurance
firms had failed to come up with any new products unique to
Nigerian people.
But I know a couple of companies that are strategically moving
into changing that. At Sovereign Trust, we have introduced
new products into the market in the last two years and these
are life related products. And we have also sent three new
products to the regulatory authorities and are awaiting their
approvals and as soon as that is done, we will get the products
launched.
Another issue is that of concentration on corporate market.
As an industry, we have not exploited the opportunity of retail
market. We have concentrated more on corporate market. Most
this too is beginning to change with more companies now devising
means of rolling out more retail products that cater for individuals.
I believe that if this strategy is pursued to its logical
conclusion, this will equally translate to improvement in
the level of patronage of insurance in Nigeria.
Investing in STI
We have plans to go to the capital market again. And I always
tell prospective investors that we remain the brand of choice
to any investor who wants to be involved in the insurance
sector. And I am speaking from a position of our records.
In this market, we have a record of achievements that is unrivalled
in the history of insurance in Nigeria. No other company has
the type of record that we have. You may recall that we started
business just about 13 years ago and from inception, we occupied
a position of about 101 out of the about 140 companies that
were in the market in 1995. And within 10 years we have moved
to the first 15, which showed that we ahead of a lot of companies
that were in operation before our establishment.
And our growth pattern over the years has been very dramatic
in that year-in-year-out we record a growth rate of about
30 per cent on the average. And, of course, you will observe
that in terms of market share, our turnover has increased
over the years as our total revenue in the year that just
ended 2007 was over N2billion which puts us in the league
of the first 10 in the industry.
Our stocks have also performed wonderfully as you could recall
that we got listed in November/December 2006 at the rate of
N1.00 and as at today, we are about N6.50 on NSE and this
shows serious growth and investors are looking at this too
and they see our quarterly results and the profitability of
the company. And let me tell you that this is one company
that is managed professionally and efficiently and we enjoy
the support of insurance brokers. So, for investors, they
will not take any wrong decision if they invest in sovereign
Trust Insurance.
Problem of human capital
With the reforms of the industry, human capital is also being
improved upon. Some people have said the industry does not
have the right human capital to manage businesses. But it
will not be totally correct to assume that we don’t
have human capital to manage the business. I think the best
thing to say is that possibly because of the changes, we have
experienced in the industry now that such level of human resources
may not be adequate.
It is one of the challenges that the reforms have thrown up
for operators. And like I said sometime ago, most insurance
companies are now positioned to invest in human capital resources
within the industry. You now see insurance companies sending
their staff abroad for courses, trainings and seminars with
a view to enhancing their skills. Operators are now facing
the challenge squarely to ensure that we fill whatever gaps
that exist.
Another issue that has not allowed the insurance industry
to be competitive for talent is the issue of remuneration.
And you know that before now, most insurance companies do
not pay fantastic salaries such as other sectors like the
banks, oil and gas companies, and the telecoms companies.
But operators in the industry have realized this fact and
most companies are re-strategizing and are doing something
positive about the remuneration packages and the general welfare
of staff.
So, the insurance companies are beginning to attract new and
good talents into the industry. In Sovereign Trust, we are
able to attract and pay the best talents and we have them
from the banks, advertising firms and that is to tell you
that the industry is changing in this regard.
Recently, we brought in the world acclaimed customer service
expert and the Chief Facilitator of the Service Quality Institute
of the United States of America, Mr. John Tschohl, to deliver
a lecture to our entire management and staff on quality service
strategies in improving patronage level for our organisation.
We are highly committed to providing exceptional customer
service of world-class standards to all stakeholders in the
industry.
Offshore investments
Going outside Nigeria has been attractive to an extent that
the board of the directors of the company perceives opportunity
in such areas. Granted that Nigeria is a big market and for
insurance business, we have not even scratched the surface
of the abundant opportunities that exists in this market.
But at the same time, we all realise the fact that the world
has become a global village. As we are operating in Nigeria,
we also have foreign investors equally coming into Nigeria
to tap into opportunities that exists here.
So, my thinking is that indigenous insurance firms, while
working to expand their businesses to take opportunities that
exists in Nigeria, should simultaneously notice businesses
opportunities that exist in the West African market and need
not wait before taking advantage of it.
You may see some companies as a matter of strategy venturing
outside Nigeria and as long as it is in line with the philosophy
and strategy of the company, I think it is an opportunity
for any player to take advantage of.
Vision for the company
It’s to the credit of the board of the company that
gave me the opportunity to serve in this capacity as managing
director. I have a team that is supporting me in this work
to met the goals that the board has set for management.
Our vision is to be the leading brand, providing insurance
and financial services of global standards. And our mission
is to enhance the everyday life of our customers through innovative
insurance and financial services, while creating exceptional
value for our shareholders.
Essentially, to be able to deliver on these, we have a set
of core value that we believe very much in that is driving
everybody that is involved in shouldering the affairs of the
company. And superior customer service is one of such beliefs
that we have to deliver upon. The next is professionalism
and the others are innovation in all we do and integrity and
empathy for customers. In the next three years, we want to
come out as a strong brand and take the company to the entire
nooks and crannies of Nigeria.
We plan to run the company efficiently to deliver good services
and profits to shareholders. So, all these are all the issues
that I am looking at.
We have quality people in the company and I have been in the
company from inception and from 1995 till date, we have virtually
up to 80 per cent of the people who were with us at inception
are still working with us. The people are very friendly and
I have enjoyed the support of staff and management since I
came on board. It’s a very friendly organization where
love thrives. |
