Alhaji Auwalu Muktari was recently made the Ag. Group Managing Director, Royal Exchange Plc. In this exclusive interview with our correspondent, he speaks on the state of Nigeria’s insurance industry and his plans to reposition the company. Excerpt:
How has the collapse of industries affected insurance in Nigeria?
The collapse of industries in Nigeria has a negative effect on our operation because one of the things that helps to engineer insurance is the manufacturing sector. If the manufacturing sector is not doing well, then, it affects the entirety of the industry. We know the problems being encountered in the textile industry because of the fact that Nigeria has been a dumping ground for materials coming from some Asian countries, which led to the demise of the textile industry. Of course, insurances that were coming from them have also disappeared. I must say that the dearth of industries has really affected insurance companies in general and Royal Exchange in particular.
The call for insurance capital base to be hiked hasn’t abated. Do you support this call?
That is the business of the regulator, NAICOM, to decide, with little or no input from the players. However, as an individual, I would support an improved capital base for insurance companies. But the NAICOM is no longer looking at the amount of shareholders’ funds but risk based capitalisation. That is fantastic to me. For instance, if you are good in fire underwriting business, you would be required to have a certain minimum capital base for that and the fire underwriting would be your business. Same thing would apply to motor insurance, life, oil and gas, aviation etc.
What are the opportunities for insurance business, especially to retail market?
We see this segment of the insurance market as very critical to the growth and success of insurance in Nigeria. Every insurance company is looking to target the retail market, which is far removed from the wholesale insurance market. The potential for retail insurance is huge and enormous, when one considers the population of Nigeria. All Nigerians deserve to have some form of insurance policy, but what is the situation today? When we say we want to achieve N30 billion annual premium income, we can’t achieve this with retail insurance contributing at least N10 billion. The regulator is also interested in seeing that all Nigerians are insured. Less than 10 million Nigerians have any form of insurance. So, there are huge potentials for the insurance companies. To drive this, the Commission came up with Market Development and Restructuring Initiative (MDRI), which has tremendous retail insurance opportunities contained therein.
Seven years since the MDRI was launched, what are the benefits?
The programme has been fairly successful even though I don’t have industry data to show the exact level of success. But for Royal Exchange, we’ve keyed into it and are benefiting immensely from the programme. As you are aware, the reason for MDRI was to ensure insurance penetration in Nigeria. The commission started with compulsory insurances and they have done a lot of awareness campaign on that aspect. But, for Royal Exchange, what we have done is to use electronic platform to sell some of the compulsory insurances.
Sir, recently, the Board of Directors of Royal Exchange Plc announced some new appointments which saw you appointed as the acting Group Managing Director/CEO. What’s the essence of this restructuring in the company?
The contract of erstwhile group managing director, Mr Chike Mokwunye, expired in December 2015 and I was appointed as the Acting Group Managing Director with effect from January 1, 2016, having been the group executive director. In addition, Mr Francis Okoli was appointed the Group Chief Finance Officer. Okoli was the assistant general manager and head of accounts, Royal Exchange Prudential Life, a subsidiary of Royal Exchange Plc. Also, Mr Benjamin Agili has been appointed Managing Director of our flagship subsidiary, Royal Exchange General Insurance Company Limited (REGIC). What these appointments mean is that we are repositioning for better growth and profitability.
The three years’ strategic plan of Royal Exchange ended in 2015. What should we expect as the dividends of that strategic plan in the next three to five years post strategic plan?
In the next three to five years, we are looking to have a profit margin of between N3 billion to N5 billion. We would have also grown our asset base to a minimum of N30 billion and, at the same time, we intend to take over the insurance leadership in terms of profitability, efficient service delivery and customer-focused products and services. Our aim and goal is to be the number one insurance group in Nigeria in terms income, underwriting capability, technical capacity and shareholders’ funds. We intend to bring in technical experts to assist with our restructuring efforts and one of our key target markets is the retail insurance segment of the market.
Some insurance companies are sick, perhaps on life support now. Are you looking at acquiring them or merging with some insurance companies?
We are looking at the issue of mergers and acquisitions in the insurance industry landscape in Nigeria and the opportunities that exist for Royal Exchange Plc to capitalise on. Once the right opportunity presents itself and it is in line with our corporate vision, the board of directors will take that decision. Right now, we will adopt a wait-and-see approach and hear what NAICOM says about the issue. We are also looking at other business acquisitions that would add significant value to the group and, again, if an opportunity exists, we will also look into it.