Mr Adeyemo Â Â Â Adejumo, Managing Director of Â Â Â Â Â Continental Reinsurance Plc in this interview with Patience Saghana harps on the need to enhance industry capacity. He says insurance operator cannot afford to disobey the market agreement and Continental Re may need to make provision for bad debt, asset diminution and many more
How is business in the reinsurance arm?
We had some increase but not as we expected it. We believe that our performance in 2010 will be better than that of 2009. We have got to the bottom of most of the provisions we made, hence we are not likely to continue with huge provisions as we have done in the last two years.
Our Tunisian and Nairobi office will start picking up and contribute their own quota to the company whilst we expect oil and gas department to also enhance the companyâ€™s income
We are expecting a key staff from the Southern part of Africa who is going to assist us in the market in that region and we believe that would also go a long way in enhancing our top plan which we believe would also enhance our profitability. We are taking an overall giant stride to improve in our risk management, we have an in-house and actually believeÂ is doing a good job and would assist us in managing our risk far better than we have been doing before.
This wouldÂ help us improve on our reserve as well as our risk management which will eventually rub off on our profitability and the motivation is quite high in the organization and expectationÂ isÂ also high on the part of all the stake- holders and we believe that 2010 is going to witness huge increase in our performance in Continental Re.
Well, last year was good for most of the reinsurance market all over the place even though there are some few big losses here and there, also in Nigeria we suffered major losses from one of the cooperate clients, but at the end of the day we still found out that our technical profit was still better, the reinsurance capacity is still in dire need and the players are still very few, so the opportunity still abound in the industry.
What is the guarantee of making any more provisions?
Well we have put on the strategies that would ensure that we would not have that kind of a thing continentally, as far as business relationship is concerned we are moving away from allowing aÂ long period debt, you either pay us or we donâ€™t take the business from you, in all the exiting businesses we are putting pressure on the clients to ensure that they pay, but weâ€™ve really subsidized, in every of our region we look at the top twenty companiesÂ that control 80percent of our business and if we canÂ manage those oneâ€™s properly, the remaining 80percent that controls 20percent we can really take them down and manage them also.
We are not doing it only for Lagos we are doing it globally but we will brake it down to all the units such that every body knows where to concentrate and get it and as we are finding some of them that we will drop. We are also looking at areas where we can increase income on those that are already existing and are doing better.
Our geographical expansion is part of the reason why we are also doing that so that if you know you are not doing well you can quickly begin to look for alternative in such a way that at the end of the day we will be witnessing growth in not only the top line but also the bottom line.
But the provision is not only on outstanding balance, it includes asset diminution as a result of stock market problem, it has also been provided heavily for but thank God the market is picking up and I expect the market to continue to move. But then, we have also mapped out strategies that would manage our assets properly in such a way that those stocks that may not really show any improvement, we would know what to do to them and those ones that have prospects we would continue to enhance our opportunity on them.
The stock market?
In the stock market as you can see things are picking up, now we are watching situations unfold, I naturally expect that to happen because interest rate has gone practically down, people may be relying on putting their money in the banks, they will be looking for other opportunities, and there areÂ basically two or three other opportunities, the stock market, real estate market and the third one is for you to come up with an idea that you think you can use the money for and it will give you some thing higher than what you could get from the bank, that sought of thought many people donâ€™t always want to exercise it for so many reason including the fear of the unknown, lack of expertise, lack ofÂ infrastructure etc.
So we have actually gotten to the bottom of asset diminution and we may not likely have much to provide for come 2010, but those oneâ€™s have been very low and we should be making better profits because if you look at our performance in 2008, we would have ended up with almost N1.8billion profit if not for the provision and 2009 we would have ended up with over N2billion profit if not for the provision but it is better for us to clean the books and clean the house so that we donâ€™t carry toxic assets and still stay alive than carry toxic asset, declare big dividends but at the same time we are not really doing fantastic and the prospect, sustenance and surrounding of the company are jeopardized.
Dealing with credible insurance companies?
Well if we are looking at 20 companies that control a chunk of the market, that does not mean that the other 80 percent are not relevant but we are into risk management and the fact that you are in risk management does not preclude us from equally managing our risk. So even when you look at the top 20, we also have to re-appraise those top 20 to be sure that yes they are really top 20 and they are doing very well, so the fact that we have top 20 companies last year does not mean that those same top 20 companies are the ones you are going to continue to deal with this year, so they were top 20 last year but that does not guarantee that they will still remain top 20 for you this year and even if they are the top 20, there is noting compelling you to deal with only the top 20 and on the remaining 80 you will still find out that there are new companies that are just coming up.
There are companies that just changed management, there are companies that are just changing ideas and their prospects are improving, so you can just go in there and pick all the other ones that you think you can easily do business with and have prospects but basically what l am trying to say is that there must be proper risk management from all angles and that is what we are looking into in Continental Re. If you have been doing business with us and you have not been paying your premium as at when due when the claims arise they donâ€™t want to hear weather we have collected premium or not they want us to pay their claims too. So if you are not paying us premium how do you expect us to pay your claims? We are in a company with a growing concern where the stake holders have expectation, so as you want to meet the expectations of your stakeholders, I also want to meet the expectations of my stakeholder and I must be able to do everything possible within me to be able to achieve that result.
So I am not saying that we are not going to deal with the good companies in the market, definitely we shall, but at the same time companies should also braze-up to the challenges ahead of all of us because it is a new era now, a new season and opportunities are there for every body and all of us will take advantage of the opportunity that is available so that we will be able to do business together.