Insurance

Insurers incur N294.90bn mgt expenses in 5 yrs

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NIA Chairman, Eddie Efekoha

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Chuks Udo Okonta

Insurance operators spent over N294.90 billion on management expenses in five years, Inspen can report.

It was gathered that the expenses incurred between 2010 to 2014 were made on underwriting, salaries, rents, commission to agents and more.

A report obtained from the Nigerian Insurers Association (NIA), revealed that non life operators incurred N220.91 billion and life operators N73.99 billion.

Shareholders have alleged that some insurers deliberately stripping them of returns on investment by concealing their benefits in over blotted management expenses.
Shareholders believed most firms short-changed them by handing their benefits under management expenses.
A top executive of a renowned shareholders group, who expressed misgivings over the issues said while shareholders are suffering due to lack of dividends and capital appreciation, insurance companies, yearly record huge management expenses.

He said shareholders have observed that most companies in a bid to deny shareholders of dividend conceal their profits in management expenses, adding that an urgent measure must be taken to check this menace perpetuated by these operators.

“Imagine, shareholders bought WAPIC Insurance shares at N13. Today, the price is just at almost the issuing rate. This is not good for a sector that wants to make progress,” he said.

He noted that prices of other sectors are gradually rebounding after the 2008 capital market financial crisis, but the price of insurance stocks has remained stunted, owing to investors’ apathy resulting from lack of returns on investment.

For the Coordinator Independent Shareholders Association of Nigeria (ISAN) Sir Sunny Nwosu, 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, they 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 can not just be in their cosy offices and say management expenses is high. Go and ask for the regulators audited accounts, you would see certain things that you would not believe,” he said.

According to the NIA, insurance companies spent N42.07 billion on management expenses in 2011, representing 19.32 per cent of the industry’s N217.74 billion gross premium income made in the year.

The report showed that Investment and Allied Insurance Plc, had the highest expenses, put at N158.39 million, as against N37.92 million premium income it recorded. The firm was followed by Universal Insurance Plc with N347.73 million, as against N349.17 million (99.6 per cent) underwritten.

Custodian and Allied Insurance Plc, was the most prudent in the general business category with N886.81 million expenses out of the N10.06 billion (8.81 per cent) income. Mansard Insurance Plc had the lowest in the life business, with N13.87 million spent out of N 2.36 billion (0.6 per cent). Zenith Life Insurance Limited spent N9.61 million out of N1.01 billion.

Other firms with high expenses include, Cornerstone Insurance spent N1.13 billion out of N3.17 billion, Equity Assurance N1.07 billion out of N2.23 billion, International Energy Insurance N1.92 billion out of N4.61 billion, LASACO Assurance N1.20 billion out of N2.70 billion, NICON Insurance N1.05 billion out of N1.38billion, Niger Insurance N100 billion out of N3.04 billion, Standard Alliance Insurance N1.38 billion out of N4.76 billion.

Continuing, Unitykapital Assurance N1.08 out of N1.87 billion, NICON Insurance Life N154.51 million out of N246.55 million, UBA Metropolitan Life N973.15 out of N1.78 billion and Unic Insurance N375.31 million out of N464.30 million.

National Insurance Commission (NAICOM) has continued to express worry over the amount spent by underwriters on their management. The regulator claimed what ought to have been return on investment are used as operating expenses by some insurance companies.

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