Economy
5 Insurance Firms in Trouble over Huge Management Expenses, Shareholders React
By Modupe Gbadeyanka
The inability to curtail their management expenses which surpasses their premium income may lead at least five insurance companies operating in the country into trouble.
According to Leadership Newspaper, the industry regulator, the National Insurance Commission (NAICOM) is not happy with the development because it had been persuasive in its approach to insurance companies to cut down on their management expenses and if this act affects their solvency margin, which would make them deep hands into their shareholders’ funds to run the affairs of the respective firms, NAICOM would be left with no other option than to sanction the affected insurers.
According to data sourced from the umbrella body of operators, the Nigerian Insurers Association (NIA), NICON Insurance Company Limited, in its 2016 financial year, generated N92 million gross premium and spent N453.7 million, translating to 4.93 percent on management expenses, while Old Mutual Life Assurance Company Limited had N1.30 billion gross premium and spent N1.83 billion, representing 1.41 percent on management expenses.
SpringLife Assurance Plc, on its part, had N32 million premium income and spent N105.2 million on its management in the same financial year, UNIC Insurance Plc had N38.7 million gross premium income and spent N244.9 million with Investment & Allied Insurance Plc having N4.3 million gross premium and spent N169.4 million on its management.
The regulatory body had earlier placed the likes of International Energy Insurance(IEI) Plc, Industrial and General Insurance(IGI) Plc, among others, on financial restriction, after it was observed that the companies deep hands into their shareholders’ funds, and would not hesitate to do same to these five insurers, if found culpable.
NAICOM had earlier said, from the observation made on financial accounts submitted by some companies, those with huge expenditure profiles have been mandated not to spend beyond certain limits.
The decision, according to the Commissioner for Insurance, Mr Mohammed Kari, was taken to ensure companies do not spend unnecessarily to the extent that they would not be able to attend to claims settlement.
He expressed his sadness over the continuous increase in management expenses of underwriting firms across the country, stating that, this is affecting their ability to give good returns on investment to their investors.
When contacted by Leadership, spokesperson of NAICOM, Mr Rasaaq Salami, said the regulatory body was unhappy over the consistent increase in management expenses of the insurance industry, but that, the regulatory body has adopted a persuasive approach to tell them to cut down on their management expenses.
According to him, “Of course, it’s their business, but where we have issue is if it affects their solvency margin and they deep hands into their shareholders’ fund.
“But the board of these companies are expected to curtail the spending of their respective management to ensure that they continue to give values to their shareholders.”
He also said NAICOM was working to address the issue of overriding commission which is also part of the expenses.
Earlier, President of Progressive Shareholders Association of Nigeria (PSAN), Mr Boniface Okezie, said most insurance companies have yet to give good returns on investment to shareholders and investors, partly due to incurring huge management expenses as well as payment of huge fines to the regulatory bodies for default in the submission of their financial accounts.
He said shareholders react to the results a company releases, its dividend payout, its future prospect, saying insurance companies have failed in all these.
He believes insurance firms are the architect of their misfortune, saying, the money they use to pay fines and spend on management expenses on a yearly basis can comfortably give meaningful dividend to shareholders.
But the national coordinator, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, felt otherwise, believing that the huge expenses are duly incurred in a bid to get good hands.
According to him, any company that wishes to attract best hands and retain them should be ready to pay.
He noted that the acclaimed huge management expenses is often incurred in a bid to engage capable personnel to drive affairs of organisations, stressing that good services are not cheap anywhere in the world and that organisations that want to be at the top should be ready to pay for the services of professionals.
“If you want the best you have to pay for it. If any regulator is coming to take up an executive job, in some of these companies, you need to know how much such person would earn and the salary becomes personal to that person.
“The regulator cannot just be in its cosy office and say management expenses are high. Go and ask for the regulators audited accounts, you would see certain things that you would not believe,” he said.
Meanwhile, most of the affected companies have been battling for survival owing to breakdown of corporate governance, while some are under regulatory intervention.
By Adedapo Adesanya
Three bellwether stocks lifted the NASD Over-the-Counter (OTC) Securities Exchange by 0.62 per cent on Friday, December 12 with the NASD Unlisted Security Index (NSI) jumping by 22.20 points to 3,600.43 points from 3,578.23 points.
In the same vein, the market capitalisation of the trading platform increased by N13.28 billion to close at N2.154 trillion from the previous day’s N2.140 trillion.
During the session, Central Securities Clearing System (CSCS) Plc went up by N2.53 to close at N39.71 per share compared with the previous day’s N37.18 per share, Geo-Fluids Plc added 35 Kobo to its price to finish at N5.00 per unit versus Thursday’s closing price of N4.65 per unit, and FrieslandCampina Wamco Nigeria Plc appreciated by 23 Kobo appreciation to sell at N60.23 per share versus N60.00 per share.
It was observed that yesterday, the price of Golden Capital Plc went down by N1.05 to N9.45 per unit from N10.50 per unit, and UBN Propertiy Plc declined by 21 Kobo to N2.01 per share from the N2.22 per share it was traded a day earlier.
There was a significant improvement in the level of activity for the day, as the volume of transactions increased by 6.2 per cent to 37.4 million units from the previous day’s 35.2 million units, the value of trades went up by 265.1 per cent to N4.9 billion from N1.4 billion, and the number of deals soared by 13.80 per cent to 33 deals from 29 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the last trading day of this week as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, the second spot was taken by Okitipupa Plc with 178.9 million units traded for N9.5 billion, and third space was occupied by a new comer in MRS Oil Plc with 36.1 million units worth N4.9 billion.
InfraCredit Plc also finished the session as the most active stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units valued at N420.3 million, and Impresit Bakolori Plc with 537.0 million units sold for N524.9 million.
By Dipo Olowookere
The bullish run on the Nigerian Exchange (NGX) Limited continued on Friday with a further 1.00 per cent growth buoyed by gains recorded by Guinness Nigeria, Champion Breweries, and others.
Data showed that the consumer goods space expanded by 1.53 per cent during the last trading session of the week, as the insurance counter grew by 0.51 per cent, and the industrial goods sector marginally gained 0.01 per cent.
However, the banking index depreciated by 0.54 per cent due to a pocket of profit-taking, and the energy industry shrank by 0.09 per cent, while the commodity sector closed flat.
Guinness Nigeria gained 10.00 per cent to trade at N217.80, Morison Industries rose by 9.84 per cent to N4.69, Champion Breweries jumped by 9.69 per cent to N14.15, Austin Laz grew by 9.66 per cent to N2.27, and C&I Leasing appreciated by 9.62 per cent to N5.70.
Conversely, eTranzact lost 10.00 per cent to finish at N12.60, Chellarams slumped by 9.00 per cent to N13.20, Eunisell depleted by 9.89 per cent to N75.15, Africa Prudential moderated by 9.77 per cent to N12.00, and DAAR Communications decreased by 9.18 per cent to 89 Kobo.
The busiest stock on Friday was Access Holdings with 107.6 million units sold for N2.2 billion, Consolidated Hallmark traded 59.9 million units worth N245.8 million, Zenith Bank transacted 48.2 million units valued at N3.1 billion, Transcorp Power transacted 42.8 million units for N13.1 billion, and Champion Breweries exchanged 36.4 million units valued at N510.2 million.
At the close of business, a total of 602.8 million units worth N30.7 billion exchanged hands in 20,550 deals yesterday, in contrast to the 529.7 million units valued at N12.3 billion traded in 18,159 deals on Thursday, representing a surge in the trading volume, value, and number of deals by 13.80 per cent, 149.59 per cent, and 13.17 per cent apiece.
Business Post reports that the All-Share Index (ASI) soared during the session by 1,485.89 points to 149,436.48 points from 147,950.59 points and the market capitalisation moved up by N945 billion to N95.264 trillion from N94.319 trillion.
By Adedapo Adesanya
An intervention of the Central Bank of Nigeria (CBN) in the foreign exchange (FX) market eased the pressure on the Naira on Friday.
The apex bank sold forex to banks and other authorised dealers in the official window to defend the domestic currency, helping to calm the FX demand pressure, with the Nigerian currency appreciating against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) by 0.11 per cent or N1.57 to sell at N1,454.50/$1 compared with Thursday’s closing price of N1,456.07/$1.
Also, the domestic currency improved its value against the Pound Sterling in the official market yesterday by N3.95 to close at N1,946.15/£1 versus the previous day’s N1,950.11/£1 but lost 10 Kobo on the Euro to quote at N1,706.46/€1 compared with the N1,706.36/€1 it was exchanged a day earlier.
At the black market segment, the Nigerian Naira maintained stability against the Dollar during the session at N1,470/$1 and also traded flat at N1,463/$1 at the GTBank forex counter.
Despite the sigh of relief, demand pressures outweighed the robust supply from the CBN and inflow from offshore players looking to participate at the OMO bills auction.
Gross FX reserves increased for the twenty fifth consecutive week, growing by a strong $396.84 million week-on-week to $45.44 billion.
As for the cryptocurrency market, it was down on Friday as pressure remained after Federal Reserve chair Jerome Powell’s speech on Wednesday, which hinted at a possible rate cut pause in January. As a result, markets now expect only two rate cuts in 2026 instead of three.
However, Chicago Federal Reserve President Austan Goolsbee, who was against a December rate cut, said he expects more in 2026 than the current median projection.
Ethereum (ETH) slumped by 5.1 per cent to $3,090.61, Solana (SOL) declined by 4.5 per cent to $132.79, Cardano (ADA) depreciated by 3.8 per cent to $0.4103, and Dogecoin (DOGE) dropped 2.5 per cent to trade at $0.1373.
In addition, Bitcoin (BTC) lost 2.4 per cent to sell at $90,342.74, Litecoin (LTC) tumbled by 1.9 per cent to $81.86, Binance Coin (BNB) fell by 0.6 per cent to $886.93, and Ripple (XRP) slipped by 0.5 per cent to $2.02, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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