…as operators lament superfluous sanctions, abysmal performance
Despite multiple challenges that have seen to the dwindling fortunes of the Insurance Industry, 11 quoted insurance firms were still made to cough up sums totalling N202.9 million, payable to the Nigerian Stock Exchange, being fines for flouting the post-listing requirement.
The companies, according to a recent NSE X-Compliance report obtained by our correspondent, were not able to file their audited financial statements as required under the rules of the nation’s bourse, between 2016 and 2017, and also, in the first quarter of the 2018 financial year.
It would have been more worrisome if the economy was going down and the stock market was going up. But what is currently happening is a reflection of the heat of the nation’s economy on companies’ performance
STOCK EXCHANGE RULE
X-Compliance report is a transparency initiative of The Exchange, which is designed to maintain market integrity and protect investors, by providing compliance-related information on all listed companies.
Notably, companies that are listed on the Exchange are required by law to adhere to high disclosure standards which are prescribed in appendix III of the listing rules. For instance, financial information which is periodic disclosure, as well as ongoing material events disclosure should be released to the NSE in a timely manner, to enable it efficiently perform its functions of maintaining an orderly market.
Some of the affected companies are: Great Nigeria Insurance Plc, Mutual Benefit Assurance Plc, Linkage Insurance Plc, Equity Insurance, Sovereign Trust Insurance Plc, Niger Insurance Plc, and Royal Exchange Insurance Plc.
Others are: Guinea Insurance Plc, Standard Alliance Plc, Universal Insurance and Staco Plc.
A detailed analysis of the sanctions, however, showed that Great Nigeria Insurance Plc was fined N35.1million for breaching the rule for not submitting its 2017 audited financials and that of the first quarter 2018. Equity Assurance Plc was sanctioned N13.6 million for failing to submit its 2017 audited financial statement, while Linkage Assurance was fined N3.5 million for also contravening the rule.
Mutual Benefits also paid a total of N5.4 million fine to the NSE for flouting its X-compliance rule of not submitting its 2017 audited financial statement and that of the first quarter 2018. Sovereign Trust Plc was fined N12.3million, while Niger Insurance paid N30.4million for failing to submit its 2017 statement and that of first quarter 2018 financial statement.
Royal Exchange Plc paid N17 million; Standard Alliance Plc, N8.2million; Universal Insurance Plc, N51.4 million; Guinea Insurance Plc, N18.5million, and Staco Insurance Plc, N7.5 million.
Financial commentators who spoke with our correspondent have queried the essence of penalties on crumbling institutions that could not even pay claims or dividends to its shareholders at the end of every financial year.
OPERATORS LAMENT INADEQUATE AWARENESS
According to the Director General of the Chartered Insurance Institute of Nigeria, Richard Borokini, who is a former Group Managing Director, Royal Exchange Assurance Plc, the sector’s major problem has remained lack of awareness of its value in Nigerians’ day-to-day living.
He said poor purchasing power of the masses in the face of the dwindling economy directly affects insurance products’ sales as consumers always strike out insurance from their budget once there is lack of funds to meet their needs.
The President, CIIN, Mrs. Funmi Babington-Ashaye, said poor perception of insurance by Nigerians and religious and cultural beliefs also constituted a big problem to the industry.
She explained that the major effect was the inability of the insuring public to renew their insurance contracts and pay their premiums, adding that despite the ‘no premium, no cover’ policy of the industry, most outfits could not pay for the insurances of their assets, including the group life insurance of their workforce, until the third quarter of the year when they managed to pay less than 50 per cent of insurance premiums to the industry.
ONYEMA CALLS FOR PORTFOLIO INVESTMENT
Reacting, the Chief Executive Officer of the NSE, Mr. Oscar Onyema, advised companies to manage their indebtedness so that monies borrowed for the purpose of businesses could contribute to profitability in the future.
“The negative performance of some companies is a reflection of the domestic economy, and to some extent, international economic performance. It would have been more worrisome if the economy was going down and the stock market was going up. But what is currently happening is a reflection of the heath of the nation’s economy on companies’ performance,”
he said.
Onyema, therefore, advised investors to invest through portfolio approach in the market, as the current state of the market creates both challenges and opportunities for investors.
“We believe that taking a portfolio approach to investing provides the best risk-adjusted alternative for participating in the capital market,” he stressed.
ON GENERAL PERFORMANCE
An Insurance broker with Prestige Assurance Plc, Mr. Kenneth Ugwumba, said the Insurance industry during the year under review, consolidated on the positive growth it recorded in the first quarter of the previous year as a result of improved awareness of many more Nigerians on insurance, and ability of the sector’s operators to block some loopholes through which operators suffer premium drip to fake
operators.
He noted that the much desired insurance inclusiveness and insurance penetration to the grassroots with the proposed introduction of ‘micro-insurance’ was not totally achieved, and that the NSE should soft-pedal on the issues of sanctions, which oftentime compound the problems of the listed companies.
‘GOVT PROPAGANDA AFFECTING MARKET PERFORMANCE’
While some analysts were specific on the poor performance of the Insurance Industry, others believe that the stock market in general suffered macro-economic challenges in the
country.
An economist and market observer, Mr. James Oghene, said policy inconsistency and propaganda from the Federal Government is a major attribute to the poor performance of equities at the stock market.
“How can a government be so embedded in lies and propaganda by saying that Nigeria
is out of recession without positive evidence in the lives of the people? If they feel that Nigerians are fools, who they can easily deceive, they sure cannot deceive the international communities,” he kicked.
This attitude, Oghene added, soon gave rise to mistrust for investment, and the boards and management of companies were finding it difficult to meet
expectations.
“Investors do not trust government policies to put in their money. So companies went borrowing to keep business running, most at times it became difficult to pay back borrowed monies.
Until government policies are well structured and enforced, doing business in Nigeria will continue to be difficult” he
said.
A professor of economics, Adebisi Ogundipe, said the cost of running business in Nigeria is too high. “You must factor in taxation, the cost of operations, and other levies.
These factors create overhead cost for companies in the course of running businesses,” he
empathised.
In all, despite the challenges faced by the insurance sector during the year, operators are very optimistic that the future of the industry is very bright, and that the future rests more on their ability to bring the upcoming generation to know about insurance and its values.
