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CRe’s writes off N1.3bn bad debt, diminution

By Patience Saghana
ContinentalReinsurance Plc has made a whopping N1.3billion provision for bad debt and diminution in the value of financial assets in 2008

Disclosing this in an interview with Vanguard in Lagos, Mr Adeyemo Adejumo, Managing Director of the company said that external auditors may still review the figure.

According to him, “Continental Reinsurance Plc’s total provisions for bad debt and diminution in the value of its financial assets are estimated at N1.3billion which is subject to review by external auditors and similar provision was made in 2008”.

“Unpaid reinsurers’ balances are an industry problem while provisioning for toxic financial assets was a direct consequence of the extreme volatile Nigerian stock market that started in 2008”.

However, he remarked that the volatility of the Nigerian stock market and general economic down turn in Africa affected the company adversely just like most institutional investors in Nigeria. “We allocated a fair portion of our financial resources to the stock market and recorded substantial losses in 2008 and 2009

He said the company has already drawn up of five-year strategic plans including ensuring that its premium are collected and thus reduce or erase bad debt from  the company’s system.

Adejumo said, “Going forward we are implementing a strategy of relentlessly pursuing our premium collection to mitigate future bad debt provisioning and on the investment front, we will continue to remain extremely conservative by making a priority, capital preservation and liquidity”.

He said that most companies in the industry have grossly abused the privilege of credit business that had resulted in huge debt which every insurance and reinsurance companies had to make provision for.

He advised, “My advice to the Insurance Industry is that cash is king and key. We should improve cash flow in our business. A claimant will not want to hear stories if he has a claim and as such we should do more business with willing payers”

In spite of all, Continental Re boss said the company had to review its debt portfolio last year and made significant provisions for balances outstanding considered doubtful of recovery

He admitted that the company’s core underwriting performance was also affected in 2009 by a major loss that occurred in the local market even at that, he added that the company is confident of its underwriting discipline which has continued to benefit its expansion model in hard times in the African insurance industry.

Though, he said the company was unable to substantially boost  its bottom line in 2009 but was able to sustained the growth of its business by rising its gross premium income to 45 percent, this he said,  is a sign of confidence and acceptability of Continental Re’s  corporate status in the Africa continent”.

The stage is already set for 2010 business outlook of the company. According to him, “ Our outlook for 2010 remains very positive as we expect to secure and capture more market shares across the continent via our regional expansion strategy. Our current geographical business organization is working wonderfully well even though some of our regional operations are yet to reach their optimal level in the short run”.

Adejumo affirmed, “We are boosting our technical team this year by adding before the end of the quarter an experienced underwriter at executive level who will not only assist in improving our operational productivity and overall technical results but also assist in opening up the South African regional markets including South Africa which accounts for over 80 percent of the African insurance business”.

This 2010, he said the company is optimist of its enhanced visibility in the continent through its activities while it continues to improve substantially our operating income.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.