Post on 31-Dec-2015
description
• Part 1: Overview of The Nigerian Economy
• Part 2: Review of The Insurance Sector
• Part 3: Repositioning The Insurance Sector
3
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 ($408bn)5
GDP OF SOME COUNTRIES ($BN)COUNTRY GDP COUNTRY GDP COUNTRY GDP
USA 14,991 Brazil 2,477 Nigeria 509
China 7,318 India 1,873 S.Africa 408
Japan 5,867 Russia 1,858 Egypt 230
Germany 3,601 Mexico 1,153 Algeria 189
France 2,773 Indonesia 847 Angola 104
UK 2,445 Turkey 775 Morocco 100
Italy 2,194 Saudi Arabia
577 Ghana 39
Canada 1,736 Malaysia 288 Kenya 34
Norway 486 Ivory Coast 24
Singapore 240 Cameroun 25
Botswana 17
6
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 $3,000
• There is significant inequality and very high poverty intensity
• Poverty and inequality will persist if corruption is not addressed. Sadly, very little attention is being paid to corruption.
7
TRANSPARENCY INTERNATIONAL RATINGS
COUNTRY SCORE GLOBAL RANKINGBotswana 65% 30th Namibia 48% 58th Ghana 45% 64th South Africa 43% 69th Liberia 41% 75th Nigeria 27% 139th
8
POOR QUALITY OF LIFEHEADCOUNT LIVING IN
ABSOLUTE POVERTY (N6,000/MONTH)
South Africa 14%Togo 28%Senegal 30%Ethiopia 31%Uganda 38%Nigeria 54%Sub-Saharan Africa
49%
Source: World Development Reports; World Bank – 2008-2011
LIFE EXPECTANCY AT BIRTHGhana 64 yearsGabon 63 yearsSenegal 59 yearsGambia 58 yearsTogo 57 yearsBenin 57 yearsNiger 55 yearsBurkina Faso 55 yearsSouth Africa 55 yearsNigeria 52 years
9
10 WORST CITIES TO LIVE INCITY LIVEABILITY SCORE % RANKING
Damascus, Syria 38.4% 1st
Dhaka , Bangladesh 38.7% 2nd Lagos, NigeriaPort Moresby, Papua NG
38.9%38.9%
3rd
3rd Harare, Zimbabwe 39.4% 5th
Algiers, Algeria 40.9% 6th
Karachi, Pakistan 40.9% 6th
Tripoli, Libya 42.8% 8th
Douala, Cameroun 43.3% 9th
Teheran, Iran 45.8% 10th SOURCE: INTERNATIONAL ECONOMIST
10
HIGH GROWTH RATES HAVE NOT DELIVERED HIGH QUALITY OF LIFE
YEAR GDP GROWTH RATE
2009 6.96%2010 7.98%2011 7.43%2012 6.58%2013 6.50%2014 6.75%
• 2009-2012 (NBS)• 2013 and 2014 : Budget
Office Projections
• In spite of healthy GDP growth rates, poverty is still pervasive
• 69% living below the poverty line – NBS estimates
• There is growing realization that growth has been happening without inclusion.
11
GDP (PPP)OF SOME COUNTRIES ($)COUNTRY GDP COUNTRY GDP COUNTRY GDP
USA 48,110 Brazil 11,640 Nigeria 2,964
China 7,319 India 3,650 S.Africa 10,960
Japan 33,670 Russia 21,920 Egypt 6,280
Germany 39,460 Mexico 16,590 Algeria 8,660
France 35,250 Indonesia 4,640 Angola 5,920
UK 35,600 Turkey 17,110 Morocco 4,950
Italy 32,670 Saudi Arabia
24,270 Ghana 1,870
Canada 40,420 Malaysia 16,050 Kenya 1,710
Norway 60,390 Ivory Coast 1,790
Singapore 60,690 Cameroun 2,360
Botswana 14,750
12
NIGERIA ANGOLA KENYA S.AFRICA2011 2012 2011 2012 2011 2012 2011 2012
Insurance Penetration
0.6% 0.7% 1.1% 1.0% 3.2% 3.1% 12.9% 14.2%
Urban Population Growth
4.0% 4.0% 4.5% 4.4% 4.4% 4.4% 1.9% 1.9%
INSURANCE PENETRATION
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.
17
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
18
SECTOR PROFILE – CAPITAL MARKET PERFORMANCE
• Market Capitalisation of N200bn (US$1.36bn) in 2006; grew to N550bn ($3.74bn) in 2008
• Today, it is less than N150bn
• Lost substantial capital to the 2008 meltdown
• The 2012 earnings performance suggests a delayed recovery – Average PAT of N448m and EPS of 7 Kobo
• Market capitalisation is a discount of 40% of book value.
19
Sector Profile• It is not very popular
• Its reputation has improved but still needs further improvement
• There was a lot of optimism after the banking consolidation with the expectation that insurance will be the next growth sector. This hasn’t materialised.
20
INTERNAL FACTORS• Ethical Standards
• Impaired Capitalisation
• Fragmented Industry With Many Marginal Players
• Weak Growth Strategy
• Industry cohesion is strengthening, but still sub-optimal
• Gaps in Human Capital Management Strategy
23
EXTERNAL FACTORS - OVERVIEW• Insurance is more positively correlated with economic
well-being of the individuals than it is to general growth rates
• Hence growing the insurance business becomes more challenging in an economy facing high poverty intensity and poor quality of life. budget theme is critical for the insurance sector
• It is thus important for the insurance sector to address the key question: How can we achieve substantial growth within the current scenario of high poverty intensity and low quality of life?
24
GDP (PPP)OF SOME COUNTRIES ($)COUNTRY GDP COUNTRY GDP COUNTRY GDP
USA 48,110 Brazil 11,640 Nigeria 2,964
China 7,319 India 3,650 S.Africa 10,960
Japan 33,670 Russia 21,920 Egypt 6,280
Germany 39,460 Mexico 16,590 Algeria 8,660
France 35,250 Indonesia 4,640 Angola 5,920
UK 35,600 Turkey 17,110 Morocco 4,950
Italy 32,670 Saudi Arabia
24,270 Ghana 1,870
Canada 40,420 Malaysia 16,050 Kenya 1,710
Norway 60,390 Ivory Coast 1,790
Singapore 60,690 Cameroun 2,360
Botswana 14,750
25
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.
26
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
27
1. Based on current policies, which sectors will drive growth over the next 10 years in Nigeria?
2. In which of these sectors will the insurance sector play a leading or catalytic role?
3. Are there sectors crucial for the growth of the insurance sector but which are yet to be positioned for growth?
4. How can the insurance sector be a catalyst for such sectors in 3 above?
5. How can we be positioned to be major investors in those sectors, such that investment will drive premium growth?
8 PERTINENT QUESTIONS
6. How can we champion the delivery of 10 million affordable owner-occupier homes over the next 20 years?
7. How can we increase the number of car owners by at least 100,000 every year?
8. Which of these will be industry initiatives and which will be driven by companies individually?
6 PERTINENT QUESTIONS
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?
30