insurance firms & capital market opportunities: investors perspective
TRANSCRIPT
Insurance Firms & CapitalMarket Opportunities:
Investor’s Perspective
In this PresentationRandom Thoughts..
..Role within the financial and capital market space
What can trip uptrip up insurancecompanies looking to cometo the capital markets…
Market Expansion issues for thethe Financial Sector Leaders Financial Sector Leaders of the future..
The state of the market todayInsured
Managing Fall-outs of Financial Reform
Changing Face of Quoted Insurance Firms
The free-for-all affairset to change quickly.
Psyche of public aboutIndustry shifting steadily
Size still a problem andresponse to change slow
Capital market welcomesthe possibilities apparentIn the sector
Our Role in the Market Space
Built around an IR Program
Intelligent Information for Investors;
Prepare IR Publications & Presentations;
Communicating Financial Results;
Preparing & Disseminating Analyst Reports for Investors;
Investment Community Relations Support Services; and
Enhancing the Visibility of clients with all Stakeholders, esp. Shareholders;
Taking a Cue from BankingInterventions embracing IR
is off the mark already…is off the mark already… Why?Why?
The Insurance IndustryAn Underdeveloped Sector (of Growth?)
48 players with over N213bn capital base post capitalisation
Turnover of N98bn (2006) to go to N250bn (estimated from 2007 qtly results)
Yet to achieve desired insurancedensity & penetration however..
Capital base insufficient to playin the critical sectors (A, O & P)
Market is a small, tightly concentrated and slow growth one, with almost 70%of premiums split between Marine, Gen. Accident and Motor Ins policies.
DistributionAdministration
Platforms
Advice/Support Services
Product
Development
HealthInsurance
InvestmentManaged
Funds
Micro-Finance
Life
Assurance
GeneralInsurance
UN
DER
WRI
TERS
BRO
KER
SA
GEN
TS
LOSS ADJUSTERS
REIN
SURA
NCE
DistributionAdministration
Platforms
Advice/Support Services
Product
DevelopmentDistribution
Administration
Platforms
Advice/Support Services
Product
Development
HealthInsurance
HealthInsurance
InvestmentManaged
Funds
Micro-Finance
Life
Assurance
Life
Assurance
GeneralInsuranceGeneral
Insurance
UN
DER
WRI
TERS
BRO
KER
SA
GEN
TS
LOSS ADJUSTERS
REIN
SURA
NCE
source: BGL/Afrinvest/NIA
Offers in market: Mkt Cap – N700bChange in perception & increased interest of Investors and shareholders alike…is ignitingnew activity ….N18 billion
N15 billionN4 billion
N10 billion
and others are still doing underground work to and others are still doing underground work to come to the market.come to the market.
N10 billion
N6 billion
Source of info:Afrinvest
Market Expansion
What to do at this Stage of the Growth Curve….
A number of insurance companies are beginning to expand their operation beyond the cities to catch a larger population of the market by offering them one form of insurance or the
other.
While some have seen market opportunities internationally by taking advantage of reforms in some parts of Africa to acquire
other insurance firms, others are going to the grassroots..
.... Discerning Investors however will lean towards Discerning Investors however will lean towards more measured operators, with a clear market focus more measured operators, with a clear market focus and a deep understanding for the long term nature of and a deep understanding for the long term nature of
the insurance market opportunitythe insurance market opportunitysource: Afrinvest
Q1 2008
Growth in Prices of Insurance Stocks…. Led the equities table compared to BANKSBANKS on many occasions with reasonable capital appreciation (gathering momentum).
Market Cap increased from about N29bn in 2005 to over N676bn ($5.6bn) by March 2008.
Q3 results being released by ‘players’ suggest that the public has crossed the ‘doubt’ phase and see the industry as a veritable growth sector… Yet its not UhuruYet its not Uhuru
So what could go wrong for a firm?So what could go wrong for a firm?Info: Afrinvest
Coming to the ‘Market’What can trip uptrip up a firm coming to the market?
Poor results from sector players
Poor record of claim settlementand service record/reputation
Lack of ambition to go beyondN2-3bn capital base to positionfirm to play in sectors hitherto controlled by foreign firms and capacity to manage risks, peopleand processes…
Reputation challenges, absence of niche and success stories..
Case Studies – Going anywhere?Moving from 1% to 5% contribution to GDP
The leaders will be those who areable to build up adequate capitalto build systems, people, processesthat can deliver long term success
Key players will develop an ability topool huge funds and achieve ageometric growth to compete for newcorporate and industrial insurableassets
Risk Mitigation becomes a key Success Criteria
Reputation in market means firmsmust match perception with reality.
Case Study 1Niger Insurance Plc……..The industry sleeping giant.
Established in 1962 (life)
Current asset base > N8bn and a fully paid-up share capital of N750m.
Built a legacy of trust and ethical values
Moving ahead of its competitors to upcountry locations across the country.
Last FYE paid N0.05/share and bonus of 1 for 5 off a 36% growth in premium and a 106% growth in PAT.
Q2 June 2007 results show an 88% (N2b) increase in GP and a 135% (N354m) increase in PAT.
While current results exceed projections the share price only recorded an 8% (7.25) appreciation from its Jan OP (6.70)
Going forward, current operating results have surpassed projections and the share price has recorded a 58% appreciation from its January opening price to date.
TRIP UP ISSUES:TRIP UP ISSUES:
Risks to the company’s growth Risks to the company’s growth and market dominance could arise and market dominance could arise from a drop in patronage by from a drop in patronage by government agencies and government agencies and parastatals, parastatals, the perception of the the perception of the company as a sleeping giantcompany as a sleeping giant, the , the bullish penetration of the market bullish penetration of the market by hitherto small insurance by hitherto small insurance companies but now recapitalised companies but now recapitalised to fund ambitious expansion plans.to fund ambitious expansion plans.
source: BGL
Case Study 2NEM Insurance Plc…… Repositioning for Growth?
Established in 1948 (General) and merged with Vigilant Insurance Company Ltd in 2006
NEM has an authorised share capital of N2.5bn, outstanding shares of 5.03 billion and a Shareholders Funds of N3.1bn.
Change in financial fortune started in 2006 with a 45% inc in turnover from N0.6bn in 2005 and PAT of N0.85bn over a loss return of N2.267m.
Q3 2007 results show a Turnover of N2.344b and PAT of N0.57bn.
Share price is 27% (N4.99) ATH above its Jan OP of N3.92. Price reps. a 21% drop from its June 2007 price of N6.32).
Though involved in all classes of insurance, NEM has been able to carve a niche for itself in Life & Pension Insurance where it has an array of nine different products.
TRIP UP ISSUES:TRIP UP ISSUES:
Medium sized company with 10 Medium sized company with 10 branches but bullish in approach. branches but bullish in approach. Re-engineering of operations Re-engineering of operations should help increase client should help increase client services by reducing lead time for services by reducing lead time for claim settlement and information claim settlement and information dissemination. Its processes and dissemination. Its processes and procedures should be simplified by procedures should be simplified by embracing IT and truly focusing on embracing IT and truly focusing on increasing customer interaction increasing customer interaction both online and offline.both online and offline.source: BGL
Case Study 3Crusader Insurance Plc………..Highly reputable..
Established in 1956 (General & Life)
Shareholder's fund of N5.5bn (ASC > N4bn), Asset base > N9bn with a very strong reserve base and is considered one of the highly capitalised insurance companies in Nigeria.
A reputation built on its efficient service delivery and prompt claims settlement
Q3 operating results (Sept’ 07) show a Premium of N1.81bn against N1.1bn (’06) while PAT increased > 100% to N0.57bn.
Share price closed at N6.70, 181% from its Jan OP (N2.67). This is a 346% increase from its 300606 close of N1.68 though it hit N6.40 on 250607 (12% inc).
Going forward, current operating results have surpassed projections and the share price has recorded a 58% appreciation from its January opening price to date.
A MODEL for the MARKET:A MODEL for the MARKET:
Crusader’s capital base helps Crusader’s capital base helps make the case for increased capital make the case for increased capital to allow firms undertake a wide to allow firms undertake a wide scope of risk underwriting across scope of risk underwriting across general business, special risks general business, special risks (like Oil & Gas, Aviation and (like Oil & Gas, Aviation and Engineering/Machinery), Individual Engineering/Machinery), Individual Life, Group Life and pension Life, Group Life and pension benefits plans (it currently does)..benefits plans (it currently does)..
Additional Info: BGL
CloseLooking Beyond Penny Stocks
Of the 27 stocks listed, only 2 are not Penny Stocks:Penny Stocks:(WAPIC N12.90 & PRESTIGE N10.93). Next 3 are CRUSADER N7.50, STACO N6.82 and LawUnion N6.80.
Performance indices now includes soft issues andnot only financial performance.
Market expansion both locally and internationally,particularly in the West Coast market exposes firms to new opportunities and risks..
Focus on product development and research to come up with products that will meet customers’ needs e.g.Auto Tracker policies, Lost baggage & travel Ins…
Impact of human capital in utilising the new capital injection into the industry by focusing on staff recruitment, training and retooling….
Additional info: Afrinvest
Investors Relations
Managing Soft Issues….
Not ‘PR’ or ‘Spin’ but a well managed market
engagement that makes it easy for investors to
‘handle’ uncomfortable news when it occurs
…..to build & nurture its financial reputation.