Distinguished Shareholders, Colleagues on the Board of Directors, Regulatory officials, gentlemen of the press, ladies and gentlemen. It is with much pleasure that I welcome you all to the 26th Annual General Meeting of our Company where the Audited Annual Financial Statements and Annual Reports will be presented to you.
Let me begin by giving you an overview of the environment under which our Company operated in the past year.
2019 BUSINESS OVERVIEW
Global economic growth slowed in 2019, impacted by a variety of challenges. The challenges included trade tensions between the USA and China which continued to impede global manufacturing & trade activities, weaken investment confidence and consumer spending. Additional challenges were posed by fiscal issues in few EU Member Countries, Brexit, and Japan’s ongoing slowdown. Therefore, the monetary policy direction in 2019 was basically through lower interest rates and deposit ratios.
Global oil demand growth during the year was estimated at less than 1 million barrels of oil per day, mainly due to cooling macro-economic indicators in major economies. However, the significant and successful effort of countries participating in the Declaration of Cooperation between OPEC and some non-OPEC countries helped the global oil market to remain relatively balanced in 2019.
The year 2019 had major socio-economic events which impacted on the economy during the year. These include the 2019 General Elections in February/March, closure of the land borders to all forms of imports and exports in August, CBN’s excluding local investors (except banks) from OMO Auctions and downgrading of Nigeria in December by the world credit rating agencies.
Inflation was on a gradual decline during the early part of year (except for increase in April/May) reaching a low of 11.02% in August. This moderation in the inflation reversed when the Federal Government closed the land borders to all forms of imports and exports in August, resulting in a continuous increase in inflation rate from 11.24% in September to 11.98% in December, the highest in 2019.
In the first eleven months of the year 2019, the Federal Government of Nigeria spent =N=9.39 trillion while it received =N=4.77 trillion. This translated to a fiscal deficit of N4.62 trillion during the period. The effect was felt in the capital budget implementation, where only about =N=1.2 trillion, representing 57% of the 2019 capital budget, was disbursed during the year. The overall debt profile of the Government also substantially increased.
In 2019, the All Share Index of The Nigerian Stock Exchange dropped by 14.6%, from 31,430.50 in 2018 to 26,842.07.
Official figures showed that Nigeria’s GDP grew by 2.55% in real terms in the fourth quarter of 2019, the highest quarterly growth performance since the recession days of 2016. Overall, the economy grew by 2.27% in 2019, as against 1.93% in 2018, surpassing the IMF’s projection of 2.1%.
Towards the end of the year, the CBN, in a bid to stimulate the economy, barred non foreign investors (excluding commercial banks) from participation in its Open Market Operations (OMO) Auction and increased the Lending to Deposit Ratio. This had the effect of a sharp drop in Treasury bill rates and that of bank deposits and increased credits from the banking sector to the real economy.
During the year, the interventions by the CBN ensured that the Naira-US Dollar rate was stable at about =N=360-63/US $1. Notwithstanding this, the external reserves of the country declined from US$43.116bn to US$38.595bn, a drop of 10.48% year on year.
Insurance Industry Review
The National Insurance Commission through a circular on May 20, 2019, released new minimum capital requirements for Insurance and Reinsurance companies in Nigeria. Non-Life Insurance companies, the category to which our Company belongs, were required to increase their share capital to a new minimum capital base of =N=10bn by June 30, 2020. On December 28, 2019, the Commission extended the deadline for compliance of the new minimum capital till December 31, 2020.
As part of its supervisory role, the Commission began series of measures and consultations on the implementation of International Financial Reporting Standard 17 – Insurance Contracts (IFRS 17) which will expectedly kick off in 2022.
2019 FINANCIAL HIGHLIGHTS FOR THE COMPANY
For our Company, the year 2019 was more impressive than 2018. There was an increase in the Gross Premium Income from =N=3.408bn in 2018 to =N=3.946bn in 2019, an increase of 15.80%, and an increase of 4.82% in the Net Earned Premium from =N=2.422bn in 2018 to =N=2.539bn in 2019.
On the major expense items, there was a 38.09% decrease in Net Claims, 4.88% decrease in Underwriting expenses and 6.53% decrease in Management Expenses when comparing the 2019 figures with that of 2018. The prudent effort of Management to strategically curtail cost in the face of dwindling business prospects is highly commendable.
There was a marginal increase of 0.22% in the Investment Income of our Company.
Overall, there was an increase of 209.92% in Profit after tax from =N=209.599m in 2018 to =N=649.594m in 2019. It is expected that our Company, building on the gains of past financial discipline and strategic positioning, will continue to produce better results in future.
The total asset base of our Company grew by 9.15% from =N=7.821bn in 2018 to =N=8.536bn in 2019, while the Shareholders fund stood at =N=5.701bn at 2019 year end, which is 12.87% higher than the position as at year end 2018.
For our group, the contribution of the subsidiaries to the overall profit after tax, after deducting that attributable to Non-Controlling Interests, increased from a loss of =N=4.618m in 2018 to a profit of =N=27.618m in 2019.
The total asset base of our group as at December 31, 2019 stood at =N=10.374bn, while the net asset base as at the same date was =N=5.764bn.
The impressive result notwithstanding, your Board is not recommending any dividend payout. The reason is to retain funds and adequately position the Company to meet the new minimum share capital as prescribed by NAICOM.
Let me use this opportunity to appreciate all our Shareholders for making the sacrifice to forgo the cash dividend which was proposed by the Board last year. Note that this unpaid dividend forms part of our General Reserve and will be allotted as bonus shares as part of means to increase the Company’s paid up Share Capital.
Just recently on 3rd June 2020 (a Post financial year development) The National Insurance Commission released new guidelines extending the recapitalization deadline to 30th September 2021 in order to mitigate the likely negative consequences of Codiv-19 pandemic on global economies.
The Commission also introduced a 2- phased process requiring at least 50 percent of the Minimum Paid up Capital for Insurance Companies to be achieved by 31st December 2020.
By implication, this will require your Company to achieve a paid-up capital threshold of N5 Billion by 31st December 2020 and the full minimum paid up capital of N10 Billion by 30th September 2021.
Your Company’s Board and Management are assiduously working on various options to meeting the recapitalisation before the deadline.
A resolution is being presented at this AGM to empower your Board to take all necessary steps to meet up with the recapitalisation deadline.
Let me state that your Company is also exploring the possibility of merger with other leading Insurance Companies as a back-up option.
I want to reassure all our Shareholders and other Stakeholders that your Company’s fundamentals remain strong and our Company is well positioned to meet the new minimum capital requirement by 30th September 2021.
With the early passage and assent of the 2020 budget in December 2019, together with the assent of the Finance Act 2020, it was expected that the perennial challenges of slow and poor budget implementation will become a thing of the past. However, the unforeseen Covid-19 global pandemic has seriously affected all calculations and the global economy is heading for a recession in 2020. No doubt these are tough and challenging periods full of uncertainty at levels never seen in the last century.
The Risk Management division of our Company is currently performing an impact assessment of the effect of Covid-19 on the Company’s prospect and operations. I wish to reassure you that your Company will weather the pandemic storm successfully. Our projections are being revised to take into consideration new and emerging risks associated with the Post Covid-19 economy while we will ensure that we make best use of the opportunities in the areas of new products and improved service delivery.
The Management and staff of our Company are highly commended for their continued deep sense and display of loyalty, commitment, honesty, and dedication to duty in the year. Their efforts in moving the Company forward will always be recognised and adequately rewarded.
I must also appreciate our esteemed clients, agents, and brokers for continuing to do business with us. We trust we have earned your enduring confidence and we look forward to your increased support and patronage going forward.
I want to assure you all that Regency Alliance Insurance Plc is here for the long haul. We have strong confidence that Nigeria remains a land of immense opportunities and prospects. Our Company is positioned to make the best of the brighter future ahead. We will always be guided by our corporate ideals and values of Professionalism, Integrity, Commitment and Efficiency as we create wealth for all our Stakeholders while mitigating all associated risks that may arise. That is our commitment to you our dear Shareholders.
Thank You all for your support and cooperation.
Mr. Clem Baiye