Alhaji Auwalu Muktari, is the Group Managing Director of Royal Exchange Plc. In this interview with Ebere Nwoji, he spoke on the impact of the recession on the insurance industry and other financial services institutions, among other issues. Excerpts:
Looking at Nigeria economically, one can see that Nigeria is not in its best state especially with the prevailing economic recession and weak value of the Naira to dollar, businesses are not in their best shape, various sectors of the economy will no doubt record abysmal performance at the end of this fiscal year. As economy operator, how will you assess the performance of the insurance sector in the past one year?
Honestly speaking, it is not easy to do business in Nigeria today. But we are hopeful that it will get better. A lot of issues and challenges have come up between January to date. A lot of organisations and businesses are being hampered due to crisis in exchange rates. Inability of aviation fuel to hover around affordable price as well as income generation power of most organisations has reasonably dropped because of inability of government to release the budget on time because Nigeria is an economy that relies on government and a lot of activities will start when government starts spending.
The president has been doing very well trying to put structures right. As it is today, a lot of activities have started picking up and we have seen the signs that it is going to be better and all Nigerians will be happy at the end of the day. It is said that after hardship, there is going to be enjoyment and we have confidence in the ability of the federal government and the strategies they are putting in place to ensure that the common man and all the businesses become successful. So I want to assure you that it is going to be better from now to the year 2017.
Let’s come down to insurance, how has it been all these while, how has the industry fared in the face of the economic recession?
Well, insurance is not in isolation. It has been part of the economy and what affects the economy affects the industry. If I am to talk particularly for my company, Royal Exchange, I will say that we are doing very well business wise. In fact, I can even tell you I am doing better than I did in 2015 despite the challenges and economic crisis in the country. But still we can do better if situations were normal and things were in the right position. We can do better if everything is going well from other sectors of the economy. Like inability to close most of government insurances has also impacted negatively on insurance activities today. But I want to assure you that at Royal Exchange, we are doing almost 34 percent above our income last year. But the challenges of insurance industry today are that in the year 2016, we envisaged a lot of claims coming our way due to climatic changes.
There has been a lot of rain from the northern part of the country. Before now, it has not been like that. With the climate change, there is heavy rain in the north this year .We have not seen that before in the north we only see it in the south so the northerners are not prepared for it. So many houses have been affected, the terrorists’ activities have caused a lot of pipeline vandalisation, with the terrorists activities in the north, in form of Boko Haram, many police, soldiers were killed, and these have group life cover, houses were damaged, all these brought a lot of claims to the industry in the current year. There are a lot of factors that have affected claims rate in this 2016.
Let us still come down to Royal Exchange Assurance plc, what is your experience like in these things?
Well, as I said, we are not isolated from the industry and the economy. But at Royal Exchange, we have been doing very well. We did better this year than 2015. So basically the impact of the economy is significant in terms of premium income generation. In fact, we have about 34 percent increase over what we did last year. The only thing we are looking at Royal Exchange is how we can reduce the cost of doing business so that we can maximum return to our shareholders.
So what has been your secret?
Aggressive marketing. We have been on our toes to make sure we bring insurance to the common man. There are a lot of unique things we do which I cannot disclose to our competitors, but I want to tell you that product development and innovation is one, looking into the channels and the way we do our businesses is two, then the determination of all the employees to ensure that we exceed the expectation of our shareholders is also a factor. Also we have loyal and committed workforce that are ready to drive the business.
You are an operator in the financial services sector which obviously feels the heat of the current recession in the economy more, what will be your suggestions on how Nigeria can come out of the recession?
Well, it is not my responsibility alone as a single operator to give the suggestion because we have an umbrella body which is the Nigeria Insurers Association (NIA). There is also the regulator of the industry which is the National Insurance Commission (NAICOM) .These bodies have seen the challenges that the industry is facing and a lot of strategic meetings are being conducted and they are looking into areas of ensuring that the industry wax stronger year in year out.
But the most important aspect of that is increasing the capacity of doing businesses so that the industry will have larger capacity to ensure that we accommodate more risks instead of ceding more risks outside the local market. Achieving larger capacity will enable us focus and reposition the industry so that we can retain more risk in the local market and with retention of more businesses locally, there will be creation of more jobs for the teeming population of Nigerian youths. There will also be growth of Nigerian insurance industry, there will also be a lot of funds for our share holders to enjoy and then we will become one of the greatest industry in Africa and part of the world in general.
Talking about building capacity, at the last insurance industry’s mega conference held few months back in Abuja, the Minister of Finance, spoke about increase in capital base of insurance firms for the same purpose of building capacity, how prepared is Royal Exchange?
Royal Exchange has been looking at investors for the past two years. But because of the conservative nature of our company, it is not every investor we want to bring into Royal Exchange. One, we have a tradition of maintaining the brand as it is. Being in existence for the past ninety- five years, we are looking for investors who will come into Royal Exchange, bring in money and at the same time bring in value addition to the way we do our business. So that there can be additional value to our share holders.
So Royal Exchange is looking definitely on the side of increasing our capitalisation to ensure that the capacity has increased. At the same time, we want people to come in with value addition in the area of improved information technology, in the area of product development, in the area of coming up with partnership for channels that can be added into our existing channels of distribution so that we can have a better way of doing insurance business and become second to none in Nigeria as well as compete in the international market.
The trend in the industry now is partnership with foreign investors. International investors are chasing Nigerian insurance firms for investment. Is Royal Exchange in talks with any of the international investors?
Yes, we are talking to about three foreign investors but I don’t want to mention names, we are talking to about three international investors and two local investors. That is also going to be concluded between now and end of this last quarter. We are also working towards listing a bond in Nigeria Stock Exchange and all the documents, process and approval from the Securities and Exchange commission is being tidied up. We hope to list bond of about N3 billion with the Nigeria Securities and Exchange commission in the next two months.
Insurance stock is not performing excellently well in the stock market and we saw this year that many insurance companies that have done their Annual General Meetings did not pay dividends and investors are not happy. How do you hope to market the bond?
Well, the issue is that insurance industry in Nigeria has its conservative way of having their ownership structure .That is constituted towards a specific number of groups and they are not willing to sell their shares because of benefits they are getting from the industry and so whoever comes, by the time he begins to enjoy those benefits of being a member of the share holders, may not want to sell their shares.
So a lot of insurance shares are not readily available at the stock exchange for people to buy. That has greatly affected the pricing .But in terms of value addition, increase in the value of your money, and at the same time, dividend pay out, a lot of insurance companies are paying dividend. It was only in 2015, when there were a lot of challenges and so many companies could not pay dividend and that came up because of regulation for those doing Annuity business because a lot of provisions were provided in their books because of annuity businesses they were writing off, but that has been taken care of in 2015 accounts and I believe subsequently, they will start to pay dividend.
Insurance penetration is still very low, what is your suggestion on how to increase penetration of insurance in Nigeria?
One is the capacity building, which is what the industry is going through now. Nigeria is a country of over 170 million people but I cannot tell you that more than three million people buy insurance as at today .So once the capacity improves, there are a lot of investments coming in because the regulators have put structures right for the industry to thrive and for investments to come in.
The industry will work towards getting to the common man buying insurance. So that instead of the existing three million buyers of insurance today, there will be about one hundred million Nigerians buying insurance. That situation will turn around. The government has also regulated a lot of products that are made compulsory but compliance is being pursued both from the NIA side and from the regulator’s side.
This gradually is being achieved, I am happy to see that penetration rate is improving in recent times, in the last five years, the penetration was much lower. That shows there is sign of movement, and that insurance awareness is being created and people are embracing it. I want to tell you it is going to come to pass, even if ten percent of the population take insurance, we are going to see a situation whereby we will surpass Kenya, South Africa and all the market leaders in terms of insurance penetration in the country.
However, there are still some beliefs in some parts of Nigeria where some people believe insurance is against their religious beliefs .But the industry is being proactive, regulators have
come up with the approval of micro insurance licences which they will issue to willing underwriters as well as the Takafu Insurance businesses which will enable players to effectively get the licences from regulators , a lot of people are going into that and I want to assure you that by the time four or five players are given licences on Takafu insurance,I want to believe that the penetration will improve, more people will buy insurance and the situation we are looking at will definitely improve and Nigeria will be better placed as a proper insurance driven country.
In what area will you want government to come in, regarding expansion of the industry to make it contribute significantly to the GDP?
Government has done a lot and regulators are doing a lot, so let’s allow the regulator to finish the programme it has and insurance will be a better place in Nigeria. I applaud the intention of the present commissioner for insurance and the speed at which he is putting sanity, integrity and acceptability into the insurance industry. He has the support of the government, so let’s give them another two to three years and insurance in Nigeria will be good.
In terms of enforcement, are you satisfied with what government is doing in the industry?
The government has done the laws but the enforcement is not there. That is as a result of the way things are in this country. Like I said, the laws are there but enforcement will have to come from so many different angles. The regulators are doing their best to ensure that enforcement is done but it may be difficult to change so many chains of activities within few years. So gradually, you have to put one thing or the other in its proper place.
Look, prior to three years back, we were doing businesses on credit but the regulator came up with the ‘no premium no cover’ and this has got positive impact on our industry today. There is liquidity. Premiums are paid as and when due and people are happy with that. Now, they came up with Takafu insurance in order to capture those people who are not willing to buy insurance. If all these people aggressively bought into the idea, licences issued, people doing Takafu insurance will get more money to their system and a lot of people will drive insurance.
You don’t need to enforce, once policies are there, put the structures right for the willing people to come in. When we started mobile telecommunications in Nigeria, not many people keyed into it but today, there is no person in Nigerian that does not have minimum of one line. We are getting to that in insurance industry. In no distant time, there will be no Nigerian without at least one insurance policy. Either you get it directly or indirectly by your employers as a result of you working with such organisation, by regulation, by enforcement and what have you.
What position will you assign Royal Exchange in today’s insurance industry in Nigeria?
Well, going by 2015 accounts, Royal Exchange is about number six. But you know most of the companies between number one to five in terms of premium income are composite companies but in my own company, we have placed general business separate and life business separate. So if am to talk about my general business which is bigger and stronger in terms of income, we are number six and my life company is number eleven. By industry’s ranking in terms of income, However, if I merge the two companies together, in terms of the percentage of those at the top with composite companies, I will still remain at either number six or five.
As I took over this January 2016, we are working hard to see that we turn around things, improve our service delivery, restructure the way we do things. Have a robust technology that will drive the business, so that we can compete with the top three. Am hoping in the next two, three years of my appointment as the group Managing Director of Royal Exchange to turn Royal Exchange as one of the top players in the country in terms of premium income generation, in terms of profitability, in terms of social responsibility activities to the Nigerian populace and assisting the government.
How long have you been with Royal Exchange?
Well, I was in Royal Exchange first in 1995 as branch manager in Kano and I worked up to 2007 when I resigned from Royal Exchange having left as Assistant general Manager to become the Managing Director of Yankari Insurance which later become FinInsurance. I left Fin insurance in 2010, and still came back to Royal Exchange as the group Executive Director in charge of marketing and as at 2016 January, I took over as acting group Managing Director and I was confirmed in June as substantive Group Managing Director so if you add the two spheres of my career in Royal Exchange, the first sphere, I spent about 12 years, before I came back and I have spent about seven years so if you add them together you see that I have spent about 19 years.
Royal Exchange has micro finance institution and other subsidiaries, and you are the one overseeing all of them as the Group Managing Director, how has it been, how has the micro finance bank been coping with competition?
Well, at the initial stage when we set up the micro finance bank, we set it up as a unit, micro finance with a little capital. Along the line, we appear to be doing very well, after three years of operation, we turned into profit and returned profit to the group, in 2015, we applied for state licence so that we can have branches within Lagos and increase the current capital from N20 million to N120 million so that we can get the licence, Central Bank inspected our books and gradually granted us approval to operate as a state micro finance bank as am talking to you now, we have two branches in Lagos and they are all doing very well adding value to the bottom line of the group and we are hoping that in the next one or two years, we should apply for licence to become national micro finance bank if it is going to be available because of the way we do our business so that wherever we have a branch of the general , life and health insurance, our micro finance bank will be there so that we can be transacting businesses to the lower income people and that is part of our vision of taking insurance to the grass root.
Clientele base-wise, in the micro finance bank, there are internal and external clients, most of the staff of Royal Exchange are clients to the micro finance bank, their salaries are paid there and they collect various loans to solve their immediate and personal problems which is an avenue that staff are being assisted. When they need money to pay their school fees, it is readily available to them they collect the loans and solve their problems and later, it is deducted from their salaries at the end of the month. Some of the subsidiaries also operate with the bank so there is great value addition and synergy between the group and the bank.
There are also a lot of external customers that is a lot of market women associations, traders’ associations and direct customers. I can tell you we have in our accounts over six thousand customers and we have affiliation with two strong banks in Nigeria, Fidelity bank and First Bank. If you open account with our micro finance bank, wherever you deposit your money you receive an alert, and wherever you withdraw, you receive an alert and have ATM that you can use nationwide in any ATM machine. So we are doing very well with our bank you can operate your micro finance bank even in your village but not outside the country.
How is your Health Management Organisation scheme (HMO) doing?
Well, HMO is a growing business because there has been a regulation for health insurance. A lot of state governments have not taken up that but in terms of corporate penetration, we are second to none, however, being in government business, we are still struggling to get there, by the time we set up the health insurance, the government clients have already been distributed but we know sates are coming into it and we are discussing with some state governments and we are getting some positive response and I can assure you that in the next two three years, it is going to be a good business.
Many Nigerians don’t still understand how the health insurance scheme of government works, can you use this medium to educate them on that and the benefits awaiting for them there?
Health insurance is an insurance that came into being following an enactment of an act under the National Health Insurance Scheme (NHIS), which is an agency under the federal government ministry of health. It is meant to be an avenue through which employers of labour take care of health challenges of their employees and their immediate families. A lot of organisations have workforce but lack policy to take care of their health. So federal government, through the National Health Insurance Scheme,(NHIS), came up with the idea of setting up these HMOs and ensuring that all employers of labour key into that through payment of a token sum as premium to the listed number of staff by selecting the level of benefit and health requirement of an employee and his family relations to be part of the scheme and any time the employee falls sick and need medical attention he will just use the certificate issued to him to go to the designated clinic to show that he has this type of insurance with the particular HMO and the clinic will treat his health requirement challenge and will automatically send the bill to the HMO for them to look at it and settle the bill as an insured person. It is like claims payment when they arise. So I am calling on all Nigerians, even if you are not earning salary to walk up to any HMO office, take up health insurance policy for you and members of your family. That will take off the burden of medical bills that you will pay when any member of your family falls sick.
Looking at Nigeria today as a country, with the present economic challenges here and there, how will you analyse the country?
Well, Nigeria is a great country and it is going to remain a great country. It is going to grow to become greater and greater by the day. I was reading some writings that said Nigeria is no longer the giant of Africa and I disagree with that. Nigeria is still the giant of Africa and will continue to be. All sectors wise. If it is the people we are there, if it is education system, we have it economically, we have the resources, it is just the ability to do things right. I think the present administration is taking us to the right direction and Nigeria will come back to be a greater country.
There is nowhere in this world where there has not been challenge and issues but the way and manner you tackle those challenges is what makes you what you will be tomorrow and Nigeria is on the path of becoming a greater nation. I am not looking at Africa, I am looking at Nigeria competing with tough countries of the world. America is not what it is today overnight. It has been in great crisis but called itself to order to get to where it is today. For Nigeria, looking at what the present administration is doing, I can tell you that it may not take hundreds of years to get things right and turn Nigeria as a country of choice.
With the way our economy is performing, will you categorise Nigeria as a developing or developed country or third world?
You cannot say Nigeria is a third world country. We are still developing because there are a lot of technological and economical things we need to do to belong to the club of developed countries. But with the vision of government, we are fast getting there. For instance, the issue of railway, which has been easy way for the common man to move around which is not here in Nigeria but it has started. There is railway line from Abuja to Kaduna, government is working to make it Abuja to Kano and come back and create Abuja to Lagos rail.
Gradually, the country will be linked, Lagos is now working on metro rail which you see in Dubai, London and other places and the governor has planned to complete the project in 2017.So you don’t need to enter motor, all these traffic you are seeing when that metro line starts working, you will not see them again. So we are going there and we are almost reaching there. It is just to get the quality of people in government that will take us there and they are there now. We only pray God will give them good health to finish the work.
I was telling somebody that you don’t need to have a house in Lagos or stay in Lagos if your family is in Abuja. If we have a good and effective rail system that will take you from Lagos to Abuja in three hours, you don’t need to move your family about .You close work by 5 pm, by 8 pm you are in Abuja. Because you are sure the system is there to take you to your destination at the appointed time.
That is what is happening in Europe and other developed world. Saudi Arabian country is one of the third world countries in Asia but they have train services from Jirga to Medina, which is about 500km journey on road but with fast moving train, you can cover the distance within one hour. So, all the taxes and motors that ply the roads will be reduced. The quality of their roads will remain solid they don’t need to be maintaining roads because few people will make use of roads .So there are a lot of economic sense in coming up with all these kind of projects. It will help the government. Now, we cannot even maintain the Oshodi Apapa road, but by the time the rail system starts working, you will see less pressure on the road and roads constructed will last longer.
Technically, intellectually, just look at Nigeria as a country and as a people, do you think we have the right people to put these facilities in place. I asked this because talking about railway, past administrations have spent a lot in the hands of Chinese, thinking they will help up fix our rail system but year in year out the situation worsens and that is why our rail system has remained in its poor state. do you think we have what it takes to put things right in this country?
The whole thing we are talking about is attitude, culture, the way we do things. Go to the United States, the best doctors we have are Nigerians, go to London, the best nurses you have there are Nigerians. Even in Europe, so many businesses you see doing great things have link with Nigerians. Once you are ready to change the attitude and the way we do things, everybody will come back home and we will enjoy our country. Somebody left Nigeria because he cannot afford to stay without light 24 hours. If you can provide light, he may not want to leave. Some left because they cannot afford to be flying all the time and leave their families to live in other parts of the country where they got job. But if I can leave Abuja and get to Lagos in two hours, I can stay with my family and work in any part of the country.
I don’t need to move around paying N5 million house rent. These are what they enjoy in countries like Europe. People live in France and work in Switzerland. Here I can leave in Kano under 30 minutes I am in Abuja if the rail system I am talking about is working. The same thing goes to other areas of life .So many of the best brains we have in this country are living outside the country because the right attitude and right way of doing things are not in place. But we are on track of putting things right in Nigeria and we will soon get there.