Global economy

The global economy recorded a ‘subdued growth’ in 2016 following the United Kingdom’s vote in June in favour of leaving the European Union (Brexit), weaker than expected growth in the United States, ongoing realignments in China and among commodity exporters, slow moving trends in demographics and productivity growth, as well as non-economic factors such as geopolitical uncertainties. These developments have put further downward pressure on global interest rates, as monetary policy is now expected to remain accommodative for longer.

The outlook for 2017 is a slow-growing global economy. Geopolitical events, restrained demand, and weak investments will take a toll on the global growth trajectory and some investors will wait and watch for clarity in the direction of political developments, particularly in Western Europe.

African economy

The growth of Africa’s Gross Domestic Product (GDP) slowed in 2016, down from 3.4 percent in 2015, to the weakest levels of 1.6% in recent years. Sharp decline in growth reflects challenging economic conditions especially in the Continent’s largest economies and commodity exporters as they continue to face headwinds from lower commodity prices, tighter financing conditions and domestic policy uncertainties. Economic activity has been notably weak across oil exporters. At the same time these economic conditions show signs of resilience faced with growing financing needs, hence commodity exporters have begun to adjust, but efforts have been uneven and remain insufficient. Against this backdrop, a modest recovery is expected with real GDP in Sub-Saharan Africa forecast to grow 2.9 percent in 2017, then rising moderately to 3.6 percent in 2018.

Africa’s Pulse notes that the region’s economic performance in 2017 will continue to be marked by variation across countries. While the larger economies and other commodity exporters are expected to see a modest increase in GDP growth as commodity prices continue to stabilize, economic activity is expected to keep expanding at a robust pace elsewhere in the region, supported in part by infrastructure investments.

Reinsurance

Business conditions in global reinsurance remain weak. Prices continue to decline across the board with overall price reduction of 0% – 5% for 2016 and wide variations amongst lines and regions, declines have slowed relative to recent years and this trend may continue into 2017. The drop in reinsurance demand seen recently appears to have plateaued in 2016. On interest rates, ‘Lower for Longer’ is a reality and reinvestment rates remain paltry which implies pain in investment returns for some time.

Gross Written Premium for the African Reinsurance market hit US$64 billion in the last quarter of 2016, still performing amidst tough competition and oversupply of capital. Profitability is coming under pressure as new capacity enter the market and international reinsurers deploy additional capacity to established markets or to new ones where they intend to expand. The fundamental strength of the African reinsurance markets remains intact despite recent economic slump. New, larger and more complex risks have arisen requiring insurance protection while the broader African middle class is eager to protect its asset and make provision for the future.  Abundant resources, a young and growing population and the need for infrastructure, energy, health and educational facilities drive the demand for protection and invariably reinsurance cessions. However, the dearth of access to local expertise, reliable data and statistics are still regarded as the weakness of the market and in addition frequent foreign exchange trading restrictions and vulnerability of fragmented and relatively small markets add to sudden swings in results.

Nigerian insurance market

The Federal Government has focused its attention on the insurance industry to reposition the sector for improved growth. The Nigerian insurance industry is set to reap the benefits of this alluring support, short and long term.

Going by predictions from notable international rating agencies and experts, the industry is set to grow in the years ahead utilizing expanding ICT deployment, population density and massive use of telecommunications facilities to sell insurance products. However, the continued challenge of infrastructure decay and liquidity squeeze occasioned by falling oil prices and the ‘perceived’ slow pace of approach to governance has had grave economic implications which have affected the insurance industry.

With the full implementation of corporate governance code, improved enforcement of ‘no premium no cover’, better adherence to National Insurance Commission (NAICOM) prudential guidelines and full compliance with IFRS requirements in addition to improved anti money laundering mechanisms, the Nigerian insurance industry continued to be a preferred investment destination from renowned players in the world insurance market.

Financial result

The Group’s Gross Premium Income (GPI) grew by 14% from NGN19.7 billion in 2015 to NGN22.4 billion in 2016. The Company, which covers business from Lagos, Douala, Abidjan and Tunis contributed NGN17.4 billion of the Group’s premium representing 73%, while the subsidiaries contributed NGN5.03 billion representing 27%. The Company’s Gross Written Premium (GWP) grew by 13%, from NGN15.4 billion in 2015 to NGN17.4 billion in 2016. GWP contributed by the subsidiaries grew by 14%, from NGN4.4 billion in 2015 to NGN5.03 billion in 2016.

The Group generates business from the six regions of Africa. 49% of the business came from Anglophone West Africa, 18% from East Africa, 9% from Southern Africa while the remaining 24% is from other regions of Africa. The breakdown of GWP shows that Non-life grew by 17%, from NGN16.9 billion in 2015 to NGN19.8 billion in 2016; while Life GWP declined by 0.04%, from NGN2.8 billion in 2015 to NGN2.7 billion in 2016.

Group underwriting profit declined by 79%, from NGN2.06 billion in 2015 to NGN0.42 billion in 2016. Investment income jumped by 36%, from NGN1.1 billion in 2015 to NGN1.5 billion in 2016. Currency Exchange gain grew from NGN 407 million to NGN4.1 billion mainly due to the devaluation of the Naira which is the group reporting currency. Profit Before Tax (PBT) grew by 60%, from NGN2.9 billion in 2015 to NGN4.7 billion in 2016; while Profit After Tax (PAT) grew by 46% to NGN3.1 billion in 2016 from NGN2.1 billion in 2015. The sharp difference in the growth between PBT and PAT is the current income tax effect resulting from the growth in unrealized foreign exchange gain which attracted deferred tax. The tax increased by 98% in 2016 compared to total assets increase of 36% from NGN29.7 billion in 2015 to NGN40.3 billion in 2016. Shareholders’ fund also grew by 27% from NGN15.5 billion in 2015 to NGN19.7 billion in 2016.

Dividend

In line with the Company’s dividend policy and subject to your approval at this meeting, the Board of Directors recommends a cash dividend of 14 kobo per share for the financial year under review.

This represents an increase of 17% over the 12 kobo per share paid in 2015.

Board changes

As reported in the Chairman’s statement for the year 2015, Mr. Paul Ojei Kokoricha and Mr. Olisa Iwenjora were appointed Non-Executive Directors representing C-Re Holding Limited on the Board with effect from March 1, 2016 to replace Mr. Mr. Joel A. Ackah and Mr. Raoul D. Moloko who resigned with effect from the same date while Mr. Ian Tofield was appointed Independent Non-Executive Director with effect from April 27, 2016.

Also during the year and after the last Annual General Meeting, Mr. Emmanuel Brule and myself were appointed Non-Executive Directors representing C-Re Holding Limited on the Board with effect from November 8, 2016 to replace Mrs. Nadia Alaoui Fettah and Mr. Merrick Wayne Oeschger who resigned from the Board with effect from the same date. Mr. David S. Sobanjo resigned with effect from December 20, 2016 having served three terms of three years stipulated in the NAICOM’s Code of Good Corporate Governance.

Staff

People are considered as the greatest asset of the Company. This forms the basis of the Company’s employment policy that stimulates achievement of its business objectives. It complies with all regulatory demands in the recruitment of employees and also ensures that the right talents are considered for appointment at the Board and top management positions. We ensure compliance with pre-employment screening of prospective employees and all regulatory confirmation requirements for senior management appointments.

The Company treats all employees, intending employees and customers fairly and equally without any form of bias on gender, sexual orientation, family status, race, colour, nationality, ethnic or national origin, religious belief, age, physical or mental disability, or any other factor. As such the Company believes and promotes equal opportunity for all employees. The Company ensures diversity and inclusion consideration in its people management agenda.

World class and best practices are entrenched in all human resource management policies that ensure the right work environment, professionalism and robust welfare initiatives. Opportunity to acquire the right competencies are provided for employees to deliver the best results.

Future outlook

Distinguished shareholders, our vision for “Continental Re” remains to be the premier Pan-African reinsurer. Ours is a permanent view on Africa, not a long, medium or short-term view. To achieve our objectives, we must continuously grow our balance sheet by raising capital from time to time so we can take advantage of the immense opportunities that abound across Africa.

Conclusion

Despite the many challenges presented by the business environment in 2016, your Company was able to weather the storm and turn in a good result. This feat would not have been possible without the contribution of all our stakeholders. The Board and management remain strongly committed to ensuring that our Company continues to improve on all its performance-measurement parameters.

I would like to appreciate every one of you who has made Continental Re the success story it is today.

Thank you.

Chief Ajibola Ogunshola
Chairman