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Chuks Udo Okonta
Only 13 out the 56 insurance firms in the country, were able to record profits between 2010 and 2014, while 43 others made losses.
Worried by the development, observers have called on insurance operators to redouble their efforts in ensuring that they remain profitable so that they can meet their claims responsibilities.
Information obtained from the annual financial reports of most firms revealed that the losses incurred by the firms, were as a result of harsh business environment and provisions for losses incurred during the economic meltdown.
Following the capital market crash that occurred in the country in 2008, most underwriters who had invested heavily in equities have their accounts in negative, while the share value of insurance stocks, alongside other listed equites witnessed a sharp price drop.
It was learnt that this allows most underwriters to incur heavy losses and were made to make huge provisions for doubtful investment, leading the firms to have negative reserves.
The Director, Finance and Account, NAICOM, Nicholas Opara, said by regulation, the companies are not allowed to pay dividend until they clear their negative reserves.
“The commission will always ask them to extinguish the negative reserves before they pay dividend. Hopefully, most of them are making profit and if it continues, they should be able to declare dividend in the near future,” he pointed out.
A report obtained from Goldlink Insurance Plc, which had continuously post negative results, stated that the losses made were as a result of losing oil and gas and other accounts, backed by outright refusal of some organisations to do business it the company due to intervention by the National Insurance Commission.
Standard Alliance Insurance Plc, which is also fighting hard to pull out of the loss environment, stated that the rise in loss it recorded was occasioned by impairment provisions on assets, as well as share of losses at its associate company.
Another firm that recorded N897 million loss, said the loss was as a result of insurance contract liabilities’ provisions made in accordance with International Financial Reporting Standard (IFRS).
According to a report by the Nigerian Insurers Association (NIA), which detailed the net profit margin of underwriters, the 13 firms that made continuous profits within the time under review were: Anchor Insurance Company Limited; Axa Mansard Insurance Plc; Cornerstone Insurance Plc; Custodian & Allied Insurance Plc; Leadway Assurance Company Limited; NEM Insurance Plc.
Others are, NSIA Insurance Company Limited; Regency Alliance Insurance Plc; Royal Exchange General Insurance Limited; Sovereign Trust Insurance Limited; Unitrust Insurance Company Limied; Wapic Insurance Plc and Zenith Insurance Company Limited.
The losses recorded yearly by some insurance firms, made it difficult for them to pay dividends to shareholders.
While most of the underwriters are making profits on a yearly basis, it was revealed that insurers devoted most of these profits to clear their negative reserve, and until they extinguish the debts, shareholders might have to wait longer to get a good returns on their investments.
Insurance shareholders have at various Annual General Meeting (AGMs) lambasted underwriters for their failure to give them dividend or bonus, especially as some companies have declared nothing to their shareholders in the last five years.
The shareholders, who expressed their grievances at the AGMs of the underwriting firms that had so far held their 2015 AGMs, were unhappy that their companies, in spite of making profits, still could not pay meaningful dividend or bonus to shareholders, while some had their accounts in negative after offsetting their previous debt.
National Chairman of the Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, was unhappy about the low level of insurance penetration in the country and its contribution to the Gross Domestic Product (GDP), stating that this has accounted for the below par value at which most of the listed insurance stocks are being sold on the NSE.
The shareholders, he pointed out, requires return-on-investment and performance, charging insurers to improve in this regard.