The global economy performed above consensus expectations in 2017. Real GDP grew by 3.7%, signiﬁcantly above the forecast of 3.3% as at the end of 2016. The consensus forecast for 2017 was for a slow-growing global economy resulting from uncertain geopolitical events, restrained demand, and weak investments. This was expected to take a toll on the global growth trajectory as some investorswould wait and watch for clarity in the direction of political developments, particularly in Western Europe. The performance is not unconnected with easy financial conditions and lots of support from fiscal policies. This strength is broad-based across both advanced economies and emerging markets.
Having exceeded expectations in 2017, the global economy is projected to carry forward its current momentum to generate above 3% growth rate in 2018. While the growth path of mature markets will remain solid in the short term, potential for much faster growth is limited and a slowdown is likely to set in later in the decade. As some major emerging markets are maturing themselves, they are unlikely to return to growth trends of the past. The good news is that qualitative growth factors – an improvement in labor force skills, digitization, and especially stronger productivity growth – may help sustain growth and provide better conditions for businesses to thrive over the next decade. Growth in emerging markets and developing economies as a whole is projected to strengthen to 4.5% in 2018 as activity in commodity export continues to recover amid firming prices.
Africa’s Gross Domestic Product (GDP) grew by 2.4% in 2017 as against 1.6% in 2016. As expected, the larger economies and other commodity exporters like Nigeria, saw a modest increase in GDP growth as commodity prices continue to stabilize with economic activity expanding at a robust pace elsewhere in the region, supported in part by infrastructure investments. The current account deficits of oil and metals exporters narrowed, but remained elevated in the non-resource-intensive countries due to strong import growth. Fiscal deficits narrowed slightly in 2017, reflecting large expenditure cuts in some oil exporting countries.
On the face of it, 2018 will be a good year for sub-Sahara Africa’s economies. The World Bank forecasts a growth of 3.2%for the year, up from 2.4% in 2017. Much of that growth will still rely on improving commodity prices, gradual strengthening of domestic demand, slowing inflation and executing economic reforms that target diversification of the economy.
Global demand for reinsurance protection increased modestly during 2017. The principal drivers were improved economies, the growing prevalence of risk-based capital regimes and emerging areas of risk transfer. The last two, at least, will continue to apply in 2018, alongside heightened risk awareness following recent major catastrophe losses.
Fitch is of the view that global demand for reinsurance will increase as a result of the catastrophe events that occurred in the recent past. Insurers may seek to purchase more aggregate reinsurance cover, given the nature of the losses in 2017, or manage specific exposures through per-risk or facultative cover. This increase in demand combined with a potential constraint in supply is likely to contribute towards an improvement in rates across catastrophe-exposed lines of businesses.
The operating environment in Sub-Sahara Africa remains challenging, with significant headwinds of currency volatility and inflationary strains amid global softening market conditions. The continent’s reinsurers have been affected by slower growth, reflecting challenging economic conditions and subsequently suppressed demand for commodity goods. Despite this backdrop, the reinsurance market in Sub-Sahara Africa continues to offer growth potential, drawing in overseas reinsurers. It is projected that more global reinsurance companies will be coming into the African market. This will enhance competition, and the fact that major economies on the continent are turning around means established local reinsurance companies will be better placed to take advantage of the rebound.
Nigerian insurance market
The Nigerian Insurance industry is set to reap the benefits of opportunities and potentials in the economic recovery occasioned by improving crude oil prices and output level stability, improving foreign reserve and declining inflation in the coming years.
In line with the Federal Government’s decision to focus more attention on the insurance industry and to reposition it for improved growth, the National Insurance Commission (NAICOM) came up with a number of market development initiatives. Some of the initiatives are NAICOM’s new pricing regime on “Compulsory Insurances”, Revised Guidelines on Micro Insurance, while there are on-going discussions on RBS – Risk Based Supervision.
Full implementation, better adherence by market players and enforcement of initiatives and regulations will enable the industry to achieve increased penetration which will invariably lead to growth in top-line sales, bottom-line profitability, addressing challenges, and heathy competition among the industry players.
The group’s Gross Premium Income (GPI) grew by 32%, from NGN22.4 billion in 2016 to NGN29.6 billion in 2017. The Company, which covers business from Lagos, Douala, Abidjan and Tunis contributed NGN20.3 billion of the group’s premium, representing 68%, while the subsidiaries contributed NGN9.2 billion representing 32%. The Company’s Gross Written Premium (GWP) grew by 17%, from NGN17.3 billion in 2016 to NGN20.3 billion in 2017. GWP contributed by the subsidiaries grew by 82%, from NGN5.1 billion in 2016 to NGN9.3 billion in 2017.
The group generated business from the six regions of Africa. 47% of the business came from Anglophone West Africa, 21% from East Africa, 11% from Southern Africa while the remaining 21% is shared between the other 3 regions of Africa. The breakdown of GWP shows that Non-life grew by 31%, from NGN19.8 billion in 2016 to NGN26 billion in 2017; while Life GWP grew by 40%, from NGN2.7 billion in 2016 to NGN3.7 billion in 2017.
Group underwriting profit increased by 213%, from NGN414 million in 2016 to NGN1.30 billion in 2017. Investment income rose by 31%, from NGN1.5 billion in 2016 to NGN1.97 billion in 2017. Currency Exchange gain dropped from NGN 4.1 billion in 2016 to NGN1.1 billion in 2017, mainly due to relative stability of the Naira which is the group’s reporting currency. Profit Before Tax (PBT) reduced by 23% from NGN4.65 billion in 2016 to NGN3.57 billion in 2017, mainly due to stability in the Naira as against the sharp devaluation that occurred in the year 2016; while Profit After Tax (PAT) dropped by 21%, from NGN3.12 billion in 2016 to NGN2.47 billion in 2017. Total assets increased by 7%, from NGN40.3 billion in 2016 to NGN43.1 billion in 2017. Shareholders’ fund also grew by 6%, from NGN19.7 billion in 2016 to NGN20.8 billion in 2017.
Continental Re celebrated her 30th anniversary during the year 2017, as a demonstration of the milestones achieved over the years as we collectively continue to see Africa more in terms of the opportunities it presents than the short-term risks we encounter. To mark the event, the Nigerian Stock Exchange invited Continental Reinsurance to the closing gong ceremony in commemoration of her achievements. At the ceremony, the Company was commended as one of the best companies in the insurance industry for its consistency in paying dividends to its shareholders. This was indeed a great honour for Continental Re.
Head office building
The much-anticipated construction of our headquarters in Lagos got underway after a ground-breaking ceremony during the year. The new headquarters will be a state of the art landmark building with ultra-modern and eco-friendly features. Located in Victoria Island, the new headquarters will provide Continental Re with a physical footprint. The project is expected to be completed and commissioned for use in the year 2018 or early 2019.
In line with the Company’s dividend policy and the Company’s commitment to ensuring returns to shareholders, the Board has resolved to maintain the same level of dividend as in the previous year. The Board of Directors, therefore, recommends a cash dividend of 14 kobo per share for the financial year under review subject to your approval.
As part of good corporate governance and commitment to continuing injection of new blood with wide experience to the board of directors, Mr. Stephen Murphy was appointed a non-executive director, representing C-Re Holding Limited with effect from October 24th, 2017 to replace Mr. Raymond Farhat who resigned with effect from the same date.
Our people are considered our greatestassets to stimulate achievement of business objectives and goals for the Company. This forms the basis of the Company’s employment policies. Our policies comply with all regulatory demands in the recruitment of employees and also ensure that the right talents are considered for appointment.
The Company treats all employees fairly and equally regardless of gender, sexual orientation, family status, race, colour, nationality, ethnic or national origin, religious belief, age, physical or mental disability, or any other factor. The Company promotes equal opportunity for all employees and ensures diversity and inclusion in its people management agenda.
Our human resources management policies are entrenched with world class best practices to guarantee right work environment, professionalism, robust welfare packages and provide opportunities for employees to acquire the right competencies that will enable them to deliver the best results.
Distinguished shareholders, our vision for “Continental Re” to be the premier Pan-African reinsurer is undaunted and we will continue to pursue this with strength and vigour. Our view on Africa is permanent, our objective is an Africa that grows from within and our strategy is always towards taking advantage of the immense opportunities that abound across Africa for the benefit of all stakeholders.
Despite the many challenges presented by the business environment in 2017, your Company was able to turn in a good result. This achievement would not have been possible without the support of all our partners and stakeholders. The board and management remain strongly committed to ensuring that our Company continues to improve on all its performance-measurement parameters.
Chief Ajibola Ogunshola