Despite headwinds, insurance holds greater prospects this year than 2015- Royal Exchange boss

As the economy grapples with economic headwinds occasioned by falling oil prices and negative exchange rate biting hard on businesses, Auwalu Muktari, recently appointed acting group managing director, Royal Exchange plc, believes that there is huge potential for the industry. In this interview with Modestus Anaesoronye, he bares his mind on the future of the business, developments at Royal Exchange, among other issues. Excerpts 

You were recently appointed the acting GMD of Royal Exchange plc. What is your vision and where do you intend to take the Company?

Recently, the board of directors, prior to our board meeting in December 2015, appointed me the acting GMD effective January 1 2016, following the expiration of the tenure of the erstwhile GMD, Chike Mokwunye. I have since resumed office and we are looking at strategic issues that can move the Company forward. So, we are trying to position the company to its rightful place as number one leader in the insurance industry in Nigeria. Also appointed alongside with me is Benjamin Agile, as the substantive managing director of our general insurance Company, following the acceptance by the board, the resignation of the former managing director. We have also pursued during my one-month of acting capacity to get NAICOM’s approval for his appointment, so, he is now the substantive managing director of our general insurance company. Also following the resignation of our former chief finance officer, the board also identified Francis Okoli who has also been in the system to take over as Chief Finance officer. So, there were the recent changes made in Royal Exchange in order to move the Company forward.

So, what strategies would you be bringing on board to enable you achieve your vision of moving the company forward as an industry leader?

Our company has always had strategies for the past years and the management has followed this conscientiously to grow the company. As at today, we have another 3-year strategy and the aim is to ensure that we return the Company back to its position as number one in the industry. And the second is to pursue acquisition of more subsidiaries to compliment our service offerings as a financial services group. We intend to acquire a Pension Fund administrator to compliment our life insurance company, which is into annuity business. So, we need to have a PFA so that we can fully tap into the opportunities provided by the Pension Reform Act. So, these are the strategies we shall be looking at within the next one to three years.

Royal Exchange in 2015 must have done some businesses, could you give us an insight into how the Company performed during the last year?

Our auditors are on ground and so, we are yet to conclude the accounts for 2015, but I can assure you that all the subsidiaries, recorded increased income over 2014 figures. Though the increase might not be significant as expected, due to economic meltdown, crash in oil prices, as well as devaluation of the currency, which affected a lot of businesses. Some of the clients did not take insurance that period, and mostly hit was the marine business because of the inability of many importers to obtain foreign exchange. So, most of the marine businesses did not reflect in our books in 2015, as result tightened regulation and stoppage of foreign exchange access on importation of some items. But as at today 2016, that has been relaxed and those businesses are coming back.

Looking at the economy today, what would be the future of insurance?

Well, there is a saying that everything that has a disadvantage also has an advantage. In one way, there is challenge in oil, in another way, there is challenge in foreign exchange but at the same time, there are other opportunities open to insurance industry following the 2016 budget as presented by government. So, it’s just for whosoever that is focused; whoever that is thinking and has a good strategy to look at these areas and see how they can move their company forward. Therefore, I do not expect that these challenges will be a hindrance to insurance. There are massive opportunities and given our population, there are many things we can do as insurers.

We have been in 2016 renewal period, given the economic headwinds in our environment, how has the customers responded to purchase of insurance?

As far as I am concerned, and based on the knowledge I have of my Company, I would say, we have done very well so far. We have exceeded our January target and we have almost doubled it. This is to show you that, if you position yourself well, focused and deploy the necessary strategies; you will achieve your target. So, we will continue to survive despite difficulties in the environment. Though there are challenges with some clients taking their risks, position yourself, diversify your sources of business, create new channels of getting the business and you will be there. So, I see 2016 much better that 2015.

Given that the 2016 budget is still being debated on, what is the position of government insurance now, particularly at the Federal level?

Well, there are existing Federal Government insurances that are still running and being paid for. Like the Head of Service insurances for public sector workers that is still running which will expire by the end of July 31, 2016 and renewable from August 2016. That of the police is still current and many others like that. As it is, this government is focused on good corporate governance and it is our hope that every aspect of the budget will be implemented. So, as insurers, we are watching keenly the budget sessions at the National Assembly and at the right time, we will do the needful.

I can confidently tell you that a lot of the parastatals have started requesting bid from insurance Companies and from there, they will be able to draw a list, once the budget is passed.  I can assure you that Royal Exchange will play a key role when the time comes.

Given your interaction with customers, are there insurance cancellations or delays as result of current happenings in the economy?

In 2015, we had projects cancelled as a result of the devaluation of currency, fall in oil prices and they are not in consonance with 2016. So we have already lost them in 2015, but so far, there has not been any sign of project cancellation and renewals are going on. We have concluded renewals of some major oil and gas businesses that are due since January.

So, with the devaluation, sum insured has gone up and that is more money for the industry. If as at last year, we insured an oil business at 200 /dollar and today, exchange rate at the parallel market is N 400/dollar, which means more premium income for the industry.

The insurance CEOs rose up after inauguration of the Insurers Committee recently and said a new era has come for the industry; do you share the same view?

Exactly, it’s a new era because we have a regulator that is focused; that is pursuing corporate governance and who is also pursuing the federal government to ensure they do insurance on their assets, so it’s a good development for the insurance industry. I tell you that if all these come to pass, the future of insurance industry in Nigeria will be brighter and it will grow from strength to strength. We need to do more as operators by increasing visibility, awareness and be able to take our services to the common man. We should not restrict our services to the elites anymore. Once that focus is achieved, the insurance industry will be a force to reckon with in the whole economy.

One of the outcomes of the recent Insurers Committee Meeting is decision on transition to risk based capital, what is the implication for the market? It is in the interest of the market. It will improve the industry image; it will improve capacity and also reduce competition at certain level, so that concentration will be in the area where you have capacity, unlike what we have currently- where a company doing general business will bid for almost all the businesses in that area. So, the regulators are coming up with a system that serves clients better. So, we look forward to the regulator actualizing this dream, which will bring a turnaround for a new regime in the industry.

Don’t you think this policy on Risk Based Supervision might trigger mergers and acquisition in the industry?

No doubt, it might trigger mergers and acquisition or raising of fresh capital. That is why I say that the bottom line is capacity. If two companies merge, have they not become stronger instead of standing on their own? It means new investments into your company and at the end of the day it will mean improved capacity. It will enable us retain more risks in the local market, as well as reduce export of risks to European and American markets.

Your customers must have heard about recent developments in the Company and may be wondering on safety of their investment, what assurances are you giving to them?

Royal Exchange has been there before us. It is here with us today and it will be here after us. It has been here in the last 94 years, older than all of us working here today because nobody is 90 years here. The highest we have is people above 50 and nobody is 60 years here. Royal Exchange has the capacity because it has been the first insurance company in Nigeria and it keeps growing with time proven results. That is why we emerged in 2007 from a mere composite company to a holding structure with five subsidiaries. That is a sign of strength.   

Modestus Anaesoronye