We’re ready for core investors, repositioning for growth – IEI


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When NAICOM intervened in IEI and appointed an interim board on which you are the interim MD/CEO, what did you meet on ground and what have you achieved with the mandate? 

When NAICOM appointed the interim board, there was a clear agenda and mandate of what we should do. One of the reasons the erstwhile board was removed was because of lots of squabbles and internal wrangling among the members. And when there is no clear corporate governance in place, everyone did what he liked. So one of our mandates is to stabilize the place. 

The company was adrift and recording losses until the shareholder funds was negative. There was a complete depletion of shareholder funds when the interim board came in and one of the mandates was to examine the situation and identify those responsible for the situation. We were also asked to conduct a forensic audit to determine the true position of the company. We have done a forensic audit, conducted by KPMG, and we were able to identify the factors and persons responsible for the depletion of shareholders’ funds. One of those factors that stuck out was bad investments. And when corporate governance is absent, anything can happen. Some investments that were in the books of the company could not be traced anywhere. 

So when we came on board, we stabilised and restructured the company and put round pegs in round holes as well as bringing in some people to strengthen both the underwriting and finance units. 

There were some businesses written that were not supposed to come into the company. For instance, bonds were indiscriminately accepted by the company and these resulted in huge losses that the company is still recovering from. In the technical area, we have largely stabilised the underwriting front and for the first time in several years, we reported underwriting profit in our 2016 results. 

Though, we are not yet out of the woods, but we can already see the goal of our coming into the company being realised. We have done very well in that regard.

How is the financial position of the company, then and now? 

By the time we reached here, the accounts of the company were three years in arrears; that was 2013, 2014 and 2015. We had to get the accounts ready and approved by NAICOM and other relevant regulators and an Annual General Meeting held early last year. And this, for us, is a major milestone for this company. We are still negotiating the Daewoo debt and until that is settled, we still have the responsibility to get it done. In order to ensure the true position of the company is revealed, we engaged Ernst & Young. The existing auditors were doing a good job but the interim board needed the services of Ernst & Young to get us credible accounts that we can show to anyone. So what we have now is accounts that have integrity.   

We have also restructured our personnel to achieve efficiency in our core mandate areas. We also reorganised our subsidiaries and one of them, IEI Anchor, has turned from losses to profits. Add this to the integrity of the interim board chairman and the entire team and you see that we are aiming to hand over a beautiful company to NAICOM as soon as we are done. 

Some people point to the fact that our losses are increasing, but the reason is traceable to forex; we put our dollar-denominated businesses in local currency treaties and so when claims occur and you have to pay, you pay a higher value based on current value of the naira against the dollar. What we met before the devaluation is that all treaties, all dollars were translated at N197 per dollar. So we had to beef up and translate to the official rate of N300plus. And the fluctuations in the forex market, created lots of losses. All the accruals demanded by IFRS were all accounted for in the books. So, today IEI has an account which reflects the true position of affairs.

Have you attracted significant revue to IEI? 

On the revenue side, we inherited a lot of liabilities; unpaid claims and high volume of commissions from broker generated businesses that we have not fully settled. That is the reason our revenue went down. In addition, the income recognition is different from what we met. Before now income recognition sometimes accounts for the entire premium in co-insurers and not just the company’s proportion. We have reversed that policy and now book only what is due to the company. 

Apart from brokers’ apathy, the current system of income recognition has reduced our revenue. But it is also good that we put in place this measure so that we don’t write all businesses and end up in losses.  Our aviation wasn’t looking good but we have strengthened it with more robust policies taking into account the interest of the consumers. 

What is your relationship with Heritage Bank? 

We still have a strong relationship with Heritage but there were issues bordering on the actual shareholding position of IEI in the company and bank reconciliation of our accounts at their head office.

When is this interim board going to pull out of IEI to allow for substantive management? 

Compared to other insurance companies under technical management by NAICOM, ours has done very well in the last three years within same timeframe. Given that we need to do the job and leave but issues that brought the interim board have not been fully resolved. 

The interim board is not willing to stay here longer than necessary. One of the tasks the interim board will undertake is to recapitalise the company and the moment the new investor comes in, the interim board leaves. The moment we resolve the Daewoo loan and get a new investor, our job is completely done and we will leave. 

We have set our timelines up to December and looking forward to a discussion with NAICOM to get their approval. The company has a lot of prospects. The PFA as a subsidiary is doing excellently well and I believe many investors will see the company as a good buy.

Some of IEI business partners may have left. How would you attract them and others?  

I will ask them to come back and see a company that is rising again. A company that is financially transparent and showing a true position of affairs as it is. We have much more integrity and our promises are all met even if gradually. Our outstanding commitments and obligations to brokers and other business partners will be fulfilled. Whoever we owe, we will pay. At some point here we paid US$1.3 million. 

We have been paying a lot of claims since we came in. It is a gradual return to health for the company. What took several years to destroy will not just be rebuilt in just a moment. It will take time to clean up. We need our partners to be patient with us and support us. Presently, we are paying all our claims of up to 31st December, 2017 as we promised.

The Nigerian insurance industry isn’t growing as desired. What’s responsible?  

The number one challenge is poor penetration. Insurance is predicated on a pool of large numbers and if you do not have large numbers you cannot build capacity. Nigeria’s insurance market lacks capacity because many people are not insuring and I believe the quick growth area lies with government enforcement of compulsory insurances. The lack of capacity accounts for the shipment of businesses abroad despite local content laws. Building local capacity entails having more businesses and individuals insuring. 

Compare insurance to pension; they have built a war chest of over N7 trillion. They have been able to do it because of government enforcement. Insurance is a form of saving too but they have not done well because of lack of government support and today contribute less than 1 percent to GDP. When you look at it that insurance has been in this country since the early 20th century, if we have been saving, this country would have been rich. However, there appears to be more seriousness now with the current government trying to enforce compulsory insurances. 

What’s the growth opportunity for IEI going forward?

I believe the future of insurance lies in the retail side of the business. I strongly contend that IEI will see opportunity in life in future and invest in it. I think the new investors when they come in may really veer into life business as well and not just stay on general business alone because that is the future of insurance. Though an energy specialist, I think the future of IEI lies in life investment. The company will still retain its leadership in energy manpower while exploring opportunities in retail lines. 

 

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