BusinessDay 24 May 2017

Wednesday 24 May 2017 C002D5556 BUSINESS DAY 13
COMPANIES
& MARKETS
COMPANY NEWS ANALYSIS AND INSIGHT
‘No Premium No Cover’ undermines
Staco Insurance premiums
…Company Posts N1.85 billion loss
BALA AUGIE
The ‘No Premium Cover
policy introduced by regulators
in order to ensure
that operators are liquid has
undermined Staco Insurance
premium income as the insurer
posted a loss of N1.85 billion
to end the 2016 financial year.
Gross premium written was
N5.40 billion in December 2016
as against N6.18 billion the
previous year. Net premium
income fell by 23.07 percent
to N3.60 billion in the period
under review as against N4.68
billion as at December 2015.
“There was a decrease of
12.33% and 15.96% in gross
written premium respectively
for group and company in 2016
in comparison with 2015 due
to the reality of no premium
no cover policy that was put
in force by the Nigerian Insurance
Industry regulator,” the
company said in its Management’s
Comment and Analysis.
A combination of weak
top lines and rising operating
expenses was responsible for
Staco Insurance 2016 loss.
The Nigerian insurer has
an operating expenses ratio of
94.05 percent, which means
it spent nearly its entire net
premium income to fund the
its operational costs of close to
N3.4 billion.
The National Insurance
Commission (NAICOM), the
body that regulates insurance
business in Africa’s most populous
nation introduced the ‘No
Premium No Cover’ Policy in
order to make the government
Electricity market gears for competition
as Gencos sell power to customers
ISAAC ANYAOGU
Nigeria’s electricity
market is bracing for
competition after
the Federal Government
through the Nigerian Electricity
Regulatory Commission
directed that electricity
generation companies can
now sell power directly to
customers.
The directive is based on
the provisions of Section 27
of the Electric Power Sector
Reform Act 2005 that allows
eligible customers are permitted
to buy power from a
licensee other than electricity
distribution companies.
Prior to this policy, the
DisCos operated like a mo-
more committed to premium
obligations and make it pay
large amount of debts it owed
the insurance industry.
“The receipts of an insurance
premium shall be
a condition precedent to a
valid contract of insurance
and there shall be no cover in
respect of an insurance risk
unless the premium is paid
in advance,” Section 50 of the
Insurance Act says.
nopoly. Even investors interested
in mini grid plants
were constrained by the
exclusive rights the DisCos
assume over their franchise
areas. This is changing.
“It will deepen competition
in the electricity market,”
says Idowu Oyebanjo,
a Power System Engineer
from the UK.
Oyebanjo further said,
“The expectation is that the
large industrial consumers
like Manufacturers Association
of Nigeria, (MAN)
industrial clusters and business
and energy parks will
benefit from this policy.
This is will gravitate towards
the independent electricity
distribution networks own-
Apart from the negative
impact of the aforementioned
policy on the performance
of Staco, the economic
downturn created
apathy towards the insurance
industry.
A recession caused by a
sharp drop in the price of oil
and a severe dollar shortage
rendered consumers impotent
and unable to acquire
properties worth insuring.
ership.”
The four categories of
eligible customers in the
Nigerian Electricity Supply
Industry (NESI) comprises
of a group of end-users registered
with the Commission
whose consumption is
no less than 2MWhr/h and
connected to a metered
11kV or 33kV delivery point
on the distribution network
and subject to a distribution
use of system agreement
for the delivery of electrical
energy.
The next category includes
those connected to
a metered 132kV or 330kV
delivery point on the transmission
network under a
transmission use of system
Rising unemployment
evidenced by layoffs means
insurers lost premium they
would have made on employee
contributions.
Insurance contributed
less than 1 percent to the
country’s GDP in 2016.
A recent survey by the
Chartered Insurance Institute
of Nigeria (CIIN) revealed
that about 86.6 million
Nigerians do not have any form
Primary education
should be the focus of
educational policies
of insurance cover.
In spite of all these challenges,
Staco Insurance remained
profitable and efficient
as combined ratio (CR) stood at
57.77 percent, lower than the
100 percent threshold.
The Nigerian insurer’s total
net claims plunged 37.50 percent
to N1.05 billion; claims
ratio dropped to 29.16 percent
in December 2016 from 35.89
percent as at December 2015.
L-R: Monica Peach, Human Resources Director, Guinness Nigeria Plc (GN Plc); Peter Ndegwa, Managing Director, GN Plc; Bola Olajomi-Otubu,
Human Resources Director, Commercial; and Rotimi Odusola, Acting Corporate Relations Director, during the grand finale of the Guinness
Cup held at Agege Stadium, Lagos.
Pic by Pius Okeosisi
agreement for connection
and delivery of energy.
Other category of customers
includes those with
monthly consumption in
excess of 2MWhr/h, and
who are connected directly
to a metered 33kV delivery
point on the transmission
network under a transmission
use of system agreement.
The last category comprise
eligible customers
whose minimum consumption
is more than 2MWhr/h
over a period of one month
and who are directly connected
to the metering facility
of a generation company,
and has entered into
a bilateral agreement for the
construction and operation
of a distribution line with
the distribution licensee
licensed to operate in the
location.
“But it’s not all doom
and gloom for Discos,” said
Wesley Omonfoman. “Other
than those connected directly
to the transmission
system, eligible customers at
11KV and 33KV would need
to enter into an agreement
with Discos, called Distribution
Use of System (DUoS)
to get supply from Gencos.”
Omonfoman further said,
“Thus Discos expectedly
would still earn their percentage
of the revenues due
to them from the overall
electricity tariff.”
P15
Synergy Capital’s
$100mn maiden
fund buys
Dimension Data
INNOCENT UNAH
Synergy Capital, the Mauritius-domiciled
private
equity fund that focuses
on West Africa investments,
has acquired the Nigerian
and Ghanaian subsidiaries of
technology company Dimension
Data in a deal whose
terms were not disclosed. The
purchase is the 10th investment
Synergy is making with
its $100 million maiden fund.
Dimension Data is based
in Johannesburg, with a turnover
of USD 7.4 billion and
offices in 49 countries, is a
member of the Japan-based
NTT group, the world’s largest
colocation provider that
owns more than 12.5 million
square feet of gross data center
spaces as at 2015.
The Nigerian and Ghanaian
business concerns of
Dimension data will now
be called Cloud Exchange
Limited in a brief transitional
period; the company will provide
IT systems integration
services to large corporations
and government entities
across West Africa.
“Our deep understanding
of the region together with the
Dimension Data and NTT’s
technological capabilities will
unlock value for our clients,”
said Akintoye Akindele, Partner
at Synergy Capital. “Our
ability to anticipate and adapt
to technological changes has
been the drive for this partnership
and acquisition.”
The Economist Intelligence
Unit’s ‘Building a digital
Nigeria’, a report published
last year, said that digital
technology is helping to drive
growth in promising non-oil
sectors in Nigeria, from media
and entertainment to finance
and fast-moving consumer
goods.
The report said that digital
technology could play an enabling
role in increasing access
to government services
like health and education,
improving financial inclusion
through mobile money, and
helping businesses overcome
infrastructure deficits.
Nigeria is connected to
the Internet by 5 submarine
cables, all of which land in
Lagos,11 providing upwards
of 11 terabytes of bandwidth
per second, much higher
than many other West African
countries, although only
between 10 and 20% of this
capacity is actually used.
This gap reflects the lack of
necessary surrounding digital
infrastructures like fibre optic
cable and base transceiver
stations (BTS).