By Patience Saghana
Mr. Segun Balogun is the managing director ofÂ Intercontinental Wapic Insurance Plc. In this interview with Patience Saghana, he articulates theÂ position of Intercontinental Wapic in the market and also addressed topical issues on oil and gas insurance business in the country. Excerpts
I will not entirely agree with the assumption that Intercontinental Wapic is a captive company because we struggle for the business of the Intercontinental Bank like any other insurance companies in the industry just that the banks gives us first consideration before any other insurance company. The business is must be competitive, must be economical and cheap to the banks before they patronize us. A lot of insurance companies get Intercontinental Bank businesses and from other members of the group which were not place through us. The only thing is that they give us first consideration where the negotiation is right and agreeable.
Banks owned insurers
If I show you the account of Intercontinental Bank, there are about 11 insurance companies on it and about six out of the 11 are not companies that have anything to do with any bank. As per arrogance, arrogance in the sense that insurance companies owned by banks commandeer the businesses of the banks but in Intercontinental Wapic, I know we share businesses with other insurance companies owned by banks and some others that have no affiliation with banks in terms of ownership. I know we have a working relationship with other insurance companies in the market.
Our office in Ghana is doing very well. When I compare their performance in two months with other insurance companies in Ghana, what they have done in two months some other insurance companies in Ghana could not achieve in six months. Our office in Ghana is one company that Nigerian insurance companies in that country want to partner with because they have a lot of ideas about what can be introduce into the Ghanaian insurance market that will generate business for them.
Well, one reason we went to Ghana was that we analysed our market and that of Ghanaian insurance market and we saw that there is better sanity in Ghana. Again, because our bank is there and we want to take advantage of bancassurance like we have in Nigeria.
Those were the two reasons that actually prompted us. Beyond that, we should expand outside the shores of Nigeria. We were the first insurance company that said we would open an office in Ghana but the board in their wisdom said that we should do a very thorough analysis of the Ghanaian insurance market first which we did. Honestly, the business in the Ghanaian insurance market is far from what we have in Nigeria insurance market. The market is very small but itâ€™s a growing market and profitable one too.
If you make one cedi in Ghana, be assured that you are making profit from that one cedi unlike in Nigeria that you can make one billion and that one billion is in no time wiped off with expenses and claims. There is a lot of sanity in the Ghanaian market. Besides, insurance is an international business and we should not just be tied to the Nigerian market only.
Until late, we were doing very well, doing very well in the sense that we sold our shares at N2.40k and it grew to as high as N13.00k even when the capital market crash started, we were still at N3.00 to N4.00 but in the last two, three weeks, it has gone below the price we sold which was N2.40k. For those who bought Intercontinental Wapic shares then, they cannot say they suffered severe losses. Apart from comparing as high as N13.00k to as low as N2.00k which is approximately N11.00 loss on one unit of shares, you can imagine the loss suffered by somebody that has N1million worth of shares. But within that period, we have done dividend of one for five, we paid dividend for about two to three years and by the time you factored all that together, you will agree with me that those who bought Intercontinental Wapic shares did not really suffer huge losses apart from loss of the difference in the price.
It is still being audited but I think the devastation in stock is about N500 million to N600 million.
Effect of loss
I do not think it will affect the company too terribly because we have provided for it and our auditors, Pricewaterhousecoopers are ensuring that things are done in line with international standards and in accordance withÂ good corporate governance. We have been providing for the loss which may have little or no significance impact on our accounts.
Post consolidation reform
One thing I can tell you about Intercontinental Wapic is that if there are going to be only 10 companies in Nigeria, Intercontinental Wapic is going to be among the 10 Intercontinental Bank owns about 60 per cent so it is the bankâ€™s dictate that will determine whether we going to stand alone or join with some other insurance companies. But looking at the antecedent of the bank, they will probably want us to stand alone. May be when we have the full details of what the conditions of the post-consolidation reform are, then there may be a change in position in order to distinguish companies that are alike in our thinking, outlook and philosophy that we may bring them in.
Oil and gas insurance
Well, oil and gas insurance in Nigeria is still an evolving thing. Every company is saying that they have oil experts but the truth about it is that we have very few experts in oil and gas insurance in Nigeria. We are one of the players of the oil and gas insurance and we have a full-fledged oil and gas insurance department manned by a professional who is well trained in sector and a number of other people in that department. In our way, we are pulling our weight in the oil and gas insurance. Our plan is to really be a big player in oil and gas insurance.
We build capacity and we are already building more capacity. If all insurance companies that are into non-life can develop the human capital needed to handle oil and gas insurance, I am sure the capacity we have will be more than what it is at present. Capacity encompasses human capabilities and the financial capabilities as well as the financials most of us have.
If you look at the shareholders funds or the capital of most insurance companies in the country, you will see that the figures are on the increase and for the human resources needed to handle oil, most insurance companies now are exposing their oil and gas staff to international training in order for them to be able to compete favourably. Within the next one to two years, you will see that the capacity will keep increasing and the federal will also increase the local content from what is it now.
70% local content target
I think what the insurance industry should do is to rise up to that challenge and ensure that they do not disappoint the federal government.
NNPC and NIA
You know Nigerian National Petroleum Corporation (NNPC) was used to taking the business outside of Nigeria and what people resist mostly is change. Naturally, one would expect that an institution will feel more comfortable in a familiar terrain than a â€˜strangeâ€™ terrain.
Oil and gas that is one class of business that is very volatile. Major catastrophe can wipe off many insurance companies in Nigeria. NNPC feels that they should pushed the oil and gas to an economy they think is vibrant that if anything happens, it is not going to affect our own economy but at the same time, we are also throwing money out. The position of NNPC is right looking at it from investorâ€™s point of view and the position of Nigerian Insurers Association (NIA) is also right looking at it from the point of the man who is looking for money. There must be a mid-point between the local insurance market and the NNPC.
NIA will have to advance superior reason to convince NNPC that yes, we have the capabilities and the companies outside are not any better than us or the NNPC will have to advance superior reason for NIA to agree with them.
Premium income and capital
We have had just one full year in 2008 and this is the second year, so one should not expect that there is going to be immediate jump in the level of income. N164.5 billion income of the industry is an approximation because most insurance companies do not have their accounts yet.
Iâ€™m sure in 2007, it was much less than that. As the years go by, the level of income will definitely catch up with the capital injection. The class of business that generate huge premium income all over the world is the oil and gas and here in Nigeria, we are just getting into it, by the time we are fully into it, Iâ€™m sure that we will have a different story to tell. One of the things that determine the level of risk a company writes is the level of capital it has. Once a company has huge capital, it can also write big business. By 2011, Iâ€™m sure, we will have a better story to tell.