‘It is bad risk management if we attempt all oil and gas business in Nigeria’

Oye Hassan-Odukale, managing director/CEO, Leadway Assurance Company Limited in this interview  on the sideline of the company’s Annual General Meeting held in Lagos spoke on its soaring leadership position in the insurance industry, developments in the market, mergers and acquisition plans and why insurance companies are averse to volatile oil and gas risks. Excerpts

Leadway in 2017 delivered another impressive result despite the challenges in the business environment, how were you able to do all of these?

Well, we thank God for what we have achieved. We are simply doing what we know how to do best. We try to hold down our cost base, we try to monitor our management expenses. The business was very good over the past year and that is the result we are seeing. There are other insurance companies in the market that also posted comparable results. Our premium base and the profitability were very healthy, and we thank God for that.

Could you tell us how much your retail business is contributing to your overall performance?

We are a composite insurance company. We have life and non-life business, and if you look at our portfolio, our life segment is the biggest component of the business. We do a lot of annuity and that is retail because you have to deal with a lot of individual clients here. So, the life business is pure retail and that is the largest chunk of our business. The non-life is general business and it is largely broker driven, as well as agency.

We know as a company you are big, but there is this assumption that insurance companies in Nigeria do not have the capacity to play actively in oil and gas risks, what is your take on this?

When I hear people say insurance companies don’t have the capacity to do oil and gas or those kinds of risks, I laugh. Oil business is an international business and you must have the big number to do it efficiently. So, insurance companies in Nigeria cannot do all the oil and gas business emanating from here, it is bad risk management. So, you cannot grow capital to do only oil and gas alone. That is wasting your capital. You have to take a proportion and share the rest to other parts of the world.

For instance, insurers in London may probably have say 1000 risks, here in Nigeria; we have less than 100 risks. So, you don’t grow capital just to do 30 or 40 businesses, you don’t do that. Insurance is a business of large numbers. For example, you can’t build capital to insurer just NNPC, that is not insurance because you don’t grow capital to do one business. That is a very inefficient way of using your capital.

So, insurance companies in Nigeria should be looking at the traditional lines of business – fire, motor and all that. Look at the number of homes we have in Nigeria. If we can insure just 10 percent of homes, you can imagine what that we translate to, for the industry. It is a better pool for insurance companies than insuring oil and gas. In oil and gas, if one risk blows up anything can happen. So, you want to participate in businesses that have larger pool, you don’t build capital for a few businesses. For example, if as an insurance company you ensure half of the homes in Ikoyi, you will be a comfortable insurance company. If one of the houses blow up, may be you pay N50 million or N100 million at most, but if one oil and gas blow up, billions of naira.

With the passage of the 2018 Budget by the National Assembly, what is the likely impact on insurance business?

Well, for government businesses that require budget approval to pay premiums, such businesses will be affected and insurance companies may start to receive their premium. So, that is positive for those businesses. Don’t forget that government is still the biggest business in Nigeria, so passage of the budget should impact the economy generally.

There are a lot of fringe players in the market, do you think mergers and acquisition is necessary in the industry?

Of course, mergers and acquisition should be a natural thing. In every business, you need mass and synergy to compete effectively and more efficient. Over time, your expenses become steady and you need more premiums to weather it, and you also need capital. You have a minimum capital, and the shareholders will be asking, guys what you are you doing with the capital. So, you must make sure you are able to turn around the capital to add value because shareholders will also be looking at how well you utilize the capital.

Now at Leadeway, are you considering any acquisition in the shortest possible time?

We are always looking out for right opportunities. The opportunity must be right. There must be value added. Two plus two must be five; if two plus two is three, no deal. You can’t do that. If two plus two is four, okay there is nothing interesting there. But if two plus two will be five, then it makes sense.