CHARTERED INSURANCE INSTITUTE OF NIGERIA 2014 INTERNATIONAL EDUCATION CONFERENCE

1. CHARTERED INSURANCE INSTITUTE OF NIGERIA2014 INTERNATIONAL EDUCATION CONFERENCE

2. REDIMENSIONING THE INSURANCE INDUSTRY CONTRIBUTIONS TO THE NATIONAL ECONOMY

3. Part 1: Overview of The Nigerian Economy • Part 2: Review of The Insurance Sector • Part 3: Repositioning The Insurance Sector

4. PART 1: OVERVIEW OF THE NIGERIAN ECONOMY

5. THE NIGERIA ECONOMY • Nigeria is a relatively large economy with apparently strong growth rates. • GDP was recently rebased with GDP of N80.3 trillion ($509.9bn) • The rebased GDP captured some new sectors notably Telecommunications and Nollywood. • Nigeria now ranks as the 26th biggest economy in the world and is the largest economy in Africa. • At least 25% bigger than South Africa ($408bn)

6. GDP OF SOME COUNTRIES ($BN)

7. BUT THE STORY IS FAR FROM PLEASANT • Nigeria is also an economy with major contradictions and weaknesses despite its size • The economy, in spite of its size, remains heavily dependent on crude oil which accounts for more than 90% of exports • Size means little without a high quality of life • On a per capita basis, we are still a low income country with GDP of just around $3,000 • There is significant inequality and very high poverty intensity • Poverty and inequality will persist if corruption is not addressed. Sadly, very little attention is being paid to corruption.

8. TRANSPARENCY INTERNATIONAL RATINGS

9. POOR QUALITY OF LIFE

10. 10 WORST CITIES TO LIVE IN

11. HIGH GROWTH RATES HAVE NOT DELIVERED HIGH QUALITY OF LIFE • In spite of healthy GDP growth rates, poverty is still pervasive • 69% living below the poverty line – NBS estimates • There is growing realization that growth has been happening without inclusion.

12. GDP (PPP)OF SOME COUNTRIES ($)

13. PART 2: REVIEW OF THE INSURANCE SECTOR

14. Source: Swiss Re: World Ins Report 2013

15. INSURANCE PENETRATION

16. INSURANCE DENSITYSWISS RE: WORLD INSURANCE REPORT 2013

17. Sector Profile (Institutional) • The industry has a total of 57 underwriting institutions comprising 16 life insurers, 30 non-life/general insurers and 11 composite insurers. • It also has an active secondary arm comprising 2 Actuaries, 54 Loss Adjusters, 569 Brokers and 2,454 Registered Agents.

18. Sector Profile (Business Volumes) • Gross Premiums have grown by 25% from 2008-2012 reaching N300bn in 2012 • However this is still way below the industry target of N1 trillion • The industry was just 0.06% of GDP compared to its target of 3% of GDP. It was 0.048% in 2008 • According to Mr. Fola Daniel, the Nigerian Insurance Commissioner, only 800,000 adults have policies, a ratio of 0.48% • Contribution to national economy is minimal

19. SECTOR PROFILE – CAPITAL MARKET PERFORMANCE • Market Capitalisation of N200bn (US$1.36bn) in 2006; grew to N550bn ($3.74bn) in 2008 • Today, it is less than N150bn • Lost substantial capital to the 2008 meltdown • The 2012 earnings performance suggests a delayed recovery – Average PAT of N448m and EPS of 7 Kobo • Market capitalisation is a discount of 40% of book value.

20. Sector Profile • It is not very popular • Its reputation has improved but still needs further improvement • There was a lot of optimism after the banking consolidation with the expectation that insurance will be the next growth sector. This hasn’t materialised.

21. PART 3:REPOSITIONING THE INSURANCE SECTOR

22. WHY IS THE INSURANCE SECTOR UNDERPERFORMING?

23. INTERNAL FACTORS • Ethical Standards • Impaired Capitalisation • Fragmented Industry With Many Marginal Players • Weak Growth Strategy • Industry cohesion is strengthening, but still sub-optimal • Gaps in Human Capital Management Strategy

24. EXTERNAL FACTORS - OVERVIEW • Insurance is more positively correlated with economic well-being of the individuals than it is to general growth rates • Hence growing the insurance business becomes more challenging in an economy facing high poverty intensity and poor quality of life. budget theme is critical for the insurance sector • It is thus important for the insurance sector to address the key question: How can we achieve substantial growth within the current scenario of high poverty intensity and low quality of life?

25. GDP (PPP)OF SOME COUNTRIES ($)

26. THE KEY STRATEGIC QUESTION FOR THE INSURANCE INDUSTRY • Are we going to be beneficiaries of economic growth growth? • Or • Are we going to be both catalysts/engineers of growth and beneficiaries of same.

27. HISTORICAL PERSPECTIVE • So far, the insurance industry has been peripheral to major transformational initiatives in key sectors • The results of this approach are evident in the current profile of the sector • The Power sector is set for a major transformation. It will be slower and more difficult than the Telecoms sector • But it will dwarf the telecom sector within a decade

28. 8 PERTINENT QUESTIONS • Based on current policies, which sectors will drive growth over the next 10 years in Nigeria? • In which of these sectors will the insurance sector play a leading or catalytic role? • Are there sectors crucial for the growth of the insurance sector but which are yet to be positioned for growth? • How can the insurance sector be a catalyst for such sectors in 3 above? • How can we be positioned to be major investors in those sectors, such that investment will drive premium growth?

29. 6 PERTINENT QUESTIONS • How can we champion the delivery of 10 million affordable owner-occupier homes over the next 20 years? • How can we increase the number of car owners by at least 100,000 every year? • Which of these will be industry initiatives and which will be driven by companies individually?

30. TWO KEY STRATEGIC QUESTION FOR THE INSURANCE INDUSTRY • Are we going to be beneficiaries of economic growth growth? • Or • Are we going to be both catalysts/engineers of inclusive growth and beneficiaries of same. • To what extent is quantum growth dependent on collaborative industry initiatives?

31. ISSUES TO BE ADDRESSED IF THE SECTOR WILL BE CATALYTIC • Strong vision at the industry level • Strategic industry leadership • Recapitalisation • Human Capacity Building • More effective regulatory enforcement