| Over 90% insurance
market untapped, so not yet time to go beyond Nigeria–
STI MD
By ODUME FESTUS
Saturday, March
29, 2008
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Photo: Sun
News Publishing |
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The year 2006 was one in which operators in the Insurance
sector had their fair share of the then President Olusegun
Obasanjo reform agenda in the financial industry. In this
case it was not Prof. Chukwuma Soludo, the CBN, governor nor
Emmanuel Chukwulozie the former embattled NAICOM boss.
But the first female finance minister Nigeria ever produced,
Dr. Ngozi Okonjo Iweala, now managing director with the World
Bank, announced the increase in the share capital of insurance
and reinsurance companies.
The policy stipulates N2billion for life insurance business,
N3billion for general insurance business, N5 billion for composite
insurance companies, and N10billion for reinsurance companies.
The whole idea was to achieve the objective of consolidation
in the industry, which was seen as a means of ascertaining
the true players who will take the sector to another height.
The MD/COO of Sovereign Trust Insurance, Mr. Wale Onaolapo
told Saturday Sun that in creating the future organizational
transformation needed in the insurance sector, there must
be clear vision of what is expected of the industry.
He admitted that Sovereign Trust Insurance is today well positioned
to shape the insurance industry post consolidation era in
order to rewrite industry rules and create new competitive
advantage. The helmsman of the company strongly believes that
this target or task requires creativity and imagination.
STI’s new initiative
“You would recall that before now in this country, insurance
business in terms of capitalization was below the N1bn mark.
Sovereign Trust Insurance (STI), before then had about N800
million shareholders fund. Today by nature of the reforms
in the financial services sectors the least capital that any
insurance company has is N2 billion for life business. But
the non-life category, which we belong to is N3 billion and
what we have realized is that the opportunity has been thrown
open for insurance business also to explore the opportunities
of diversifications.
“In terms of our operational structure at insurance
level, we have come up with a new business model, we have
the plan to cover the entire Nigeria federation within the
next three years.
“That plan is to have branches in all the state capitals,
and subsequently prosecute the establishment of branch outlets
in all the local governments. We want to bring insurance to
the doorstep of every Nigerians. So we want to change the
perspectives of insurance business and we believe to a large
extent that it will promote the interest and awareness of
insurance business generally.
“We also plan to diversity into other lines of business
so that the changes effected at the executive levels in our
organization will see my executive vice chairman taking responsibility
for promoting subsidiaries of the company. And basically that
is what had been carved out for the executive vice chairman.”
The subsidiaries
“They are planned at the first instance to come up with
four. The companies had already been incorporated and my executive
vice chairman is working at setting up the structures. So
the mandate is for him to promote these companies and nurture
them, while I will face the insurance business of the company
squarely. Part of our plan is to approach the capital market
and we have already obtained the board’s approval.
“We planned to go back to the capital market to raise
more fund through Initial Public Offer (IPO). We are taking
our capital to a level that will enable us to pursue the ambition
we have set for ourselves in order to impact on the economy
of Nigeria.
“We are venturing into real estate business, even though
we have always maintained investment in the real estate sector
as an insurance entity. We plan to incorporate a company that
will focus on real estate. There are different aspects of
the business one can move into. We would pursue what would
be in the best interest of the company. Beyond that, we are
also going into microfinance, life business as a full-fledged
subsidiary and entity. And of course, the existing portfolios
are there for us to venture into this year. So these are the
four main areas that we are exploring.”
Foreign operations
“We recognise that the world is now a global village
and there is opportunity all over the world and if you have
the resources to explore this opportunities you can go for
it. We have a long-term objective of extending the frontiers
of our business beyond the Nigerian shores, but we are approaching
that in a strategic manner, and, in my own opinion, Nigeria
is the biggest market in Africa. And I believe also that wise
counsel will inform that for you to extend your expansion
beyond a particular locality you must first cover that locality
already known. You must be fully on ground such that you would
say there are no longer challenging opportunities as a reason
to move.
So, we know definitely that the brand: Sovereign Trust, in
the next ten years will be a global brand and we plan to be
in West Africa and the most prominent business cetrepoints
of the world, like London, New York. We have it at the back
of our mind to open offices in these areas. But what we are
looking at first is to cover the Nigerian market, because
we have not fully explored here. The penetration level of
insurance company in Nigeria is less than 10 percent. By the
time we capture about 70 to 75 percent of the entire market
we can say yes, we have established our identity as a national
brand in the sector.
So I expect insurance operators to take a que from banks who
had explored the entire nation before going offshore. If we
see any strategic sense in venturing into any of these market
within the next three years we will make the move. But until
such a time you will not hear us declaring interest in any
of these market, even though we have conducted studies and
we have our papers ready.
Place of insurance
T)he company is pursuing some strategical course, part of
which is business expansion and beyond that the insurance
business itself requires enhanced capacity. And when you talk
of insurance business of risk management, you require very
solid financial base to underwrite all big risk emanating
from the market.
Now the investment climate in Nigerian is robust with a lot
of foreign direct investments coming in. Projects are springing
up and these projects run into billions of dollars and of
cause they would want to look up to the insurance industry
for the survival of other lines of businesses.
And the only way you can really shoulder other people’s
risks is being strong yourself. So insurance requires serious
working capital in addition to diversifications, which on
its own is highly capital intensive. Pursuing these lines
of decision will make the insurance sector enhance its contributions
to the gross domestic product (GDP) of the nation.
To hit IPO
We plan to go to the stock market hopefully by the middle
of the year, and we plan to take our capital base beyond N10
billion. So I can’t say categorically now the exact
amount we will be coming out with. We need to first hold our
extraordinary general meeting and carry the shareholders and
it is after the approval that we will know precisely how much
we want to raise.
Poor human capital base
Beyond normal business issues, we now run a bigger business
than we use to run. We have to put up a structure, you have
to develop capacity to fill the structures, the human capital
aspect, getting the right people to come on board, to supply
the human resources aspects of the services is one area that
the industry is really facing challenges.
There is serious competition for talents and there are limited
good hands in the market, but we are all taking it in our
strides. They are challenges that can be over come, so beyond
that generally, infrastructure problems in the country affects
our operations because it will definitely increase the cost
of doing business which other business do experience. So those
are the general issues.
Insurance brokers’ excesses
The insurance broking community has professionals like you
have in any other sector. There are those that play by the
rules and there are those that do not play by the rule. There
are the good ones and the few bads eggs. So we try to engage
and dialogue with the good ones and to see ways they can improve
on those areas of their operations where insurance companies
find difficult to come to terms with. In a way, that will
bring about relief in the relationship. My plan is to engage
those ones that I know have value to really add and get to
win their confidence and try to improve on the relationship.
And for those that are not playing by the rules and are not
willing to change, we have to redefine our rules of business.
In the future
In the next five years I expect STI to have risen to be one
of the five leading insurance companies in this country. It’s
going to be a tough game no doubt, but we have all it takes
to accomplish it. That is my dream for the company. We are
a leading brand in the country currently and we will continue
to strive to provide quality services to our customers and
equally be alive to our responsibilities to other stakeholders.
Getting all these things right will lead STI to the promise
land.
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