Distinguished Shareholders, Representatives of the various regulatory authorities, Invited Guests, Gentlemen of the Press, Ladies and Gentlemen, it is with honour and great delight that I welcome you all to the 16th Annual General Meeting of our most cherished company, Sovereign Trust Insurance Plc.
In line with our tradition of transparency and informative reporting, before I present our operational performance for the year ended 31st December, 2010, it is very important that I bring to your notice the prevailing circumstances that permeated our environment during the year under review.
The world economy came out of crisis in 2010 on the back of combined and calculated government interventions and policies adopted across the globe.
This recovery was largely driven by the BRICs economy in conjunction with positive economic performances from the emerging markets. Notwithstanding, consensus about the recovery suggest fragility with apparent volatility in most advanced and a few emerging economies.
By and large, the tide has waned considerably and the coast looks clearer for world economies to cruise back to growth trajectory in the coming year.
Similarly, the domestic economy has displayed a high level of resilience as evidenced by the recorded 7.9% growth in GDP that surpasses expectation of many analysts. The performance was largely driven by increased Agricultural output, cessation of hostility in the Niger Delta with the resultant increase in oil output and stable oil prices vis-à-vis stable political climate.
The capital market recorded a significant recovery in 2010 after the decline associated with the global financial and economic crises of 2008 and 2009. The NSE All-Share Index (ASI) grew by 18.5%, largely due to share price recoveries in the banking, food/beverage, insurance and oil & gas sectors.
Inflation remains stubbornly high within the year despite several policy roll-out by CBN to bring down the rate to a single digit benchmark. The Inflation rate as at the end of the year stood at 11.8% despite the increase of MPR from 6% to 6.25% in the last quarter of the year.
With the commencement of operation by Asset Management Corporation of Nigeria (AMCON) in the later part of the year, the corporation had purchased nonperforming loans (NPL) up to a sum of N1.04 trillion from 22 out of 24 banks with a three year initial consideration zero coupon bond. Additional purchases of NPL are scheduled for the first quarter of 2011. The total NPLs in the industry is estimated to be N2.2 trillion.
The country's positive performance when measured under different performance indices has made Standard & Poors (S&P), one of the global renowned rating agencies, to affirm its rating of the country of B+ (long-term rating) and B (short-term) foreign and local currency with a stable rating outlook.
It is important to note that all these positive feats were achieved by the country in the midst of several political challenges occasioned by the protracted and eventual demise of President Umar Musa Yar'Adua which put to test the resilience of the country's young democracy and brought about President Jonathan's reign.
On the other hand, the country's golden jubilee marked on 1st October, 2010 was marred by the sad twin car-bombing which claimed several lives and destroyed properties. It was no doubt the worst independence gift that Nigerians could have imagined.
THE INSURANCE INDUSTRY
In Nigeria, the year witnessed a continued emphasis on the rule of law. The judiciary lived up to expectation of fair play in resolving varied 2007 election petitions that were pending before the courts.
As the larger economy heralded the news of improved performance in economic indicators, the insurance industry also looked better when compared to the previous year. The perennial industry challenges is being faced headlong by the regulators through different policy roll-outs and initiatives aimed at positioning the Industry as a major contributor to economic growth.
The regulator is adopting stronger regulatory stance on practitioners and the intermediaries to sanitize the Industry and improve efficiency. The passage of the Nigerian Content Oil and Gas Industry Development Act which stipulates that 70% of all risks associated with oil and gas businesses should be placed with local insurers and re-insurers by 2010 is also a pointer to better days to come. The huge and untapped retail Insurance market and a sustainable life assurance segment of the market also present great opportunities for the Industry to harness.
It is unarguably clear, that the Commission is focused on standardizing the operations of the industry, especially in meeting the deadline on International Financial Reporting Standard (IFRS). Following the approval of the Federal Executive Council, the Nigerian Accounting Standards Board (NASB) in December 2010, issued an implementation roadmap for Nigeria's adoption of IFRS which set a January 2012 date for compliance by publicly quoted companies and insurance companies in Nigeria.
I say with every sense of humility that our company, in our usual way of setting the pace in the industry in Nigeria has begun the process of migrating to the new reporting platform and we will work towards meeting the January 2012 deadline.
At the back of the several strategic measures adopted by the Company to withstand the challenges and realities of the operating environment, I am glad to report that your company has bounced back to the path of profitability which it is traditionally known for.
Gross Premium for the year ended 31st December, 2010 stood at N4.76 billion, a performance that represents 7% increase over a sum of N4.44 billion recorded in the previous year.
Flowing from the above revenue, Profit before tax rose by 3052% from N13.19 recorded in the year ended December 2009 to N415 million for the year ended 31st December, 2010. In the same vein, Profit after tax increased by 7257% to close the year at N308 million from N4.19 million reported in 2009.
Consequent upon this performance, Shareholders Fund increased by 9% from a sum of N3.44 billion recorded for the year 2009 to N3.75 billion as at 31st December, 2010.
With this result, the resilience of our brand has once again been brought to the fore, with proven capability to bounce back to profitability from a weak position in the year 2009. We are committed to improving on our profitability going forward and will continue to ensure that we deliver superior bottom line accordingly.
At the back of your approval in our last Annual General Meeting for the company to embark on appropriate capital raising process via a Rights Issue exercise, the Directors have moved into action to actualize the issuance of shares to existing shareholders at a ratio of 1 for 3 ordinary shares already held at 50kobo per share .
We have secured all regulatory approvals in this regard and the offer has opened and closed appropriately. It is expected that the offer would witness a successful outcome given the enthusiasm demonstrated by existing shareholders in supporting the exercise.
Mr. Sola Adebayo formally notified the Board of his resignation subsequent to his appointment as a Commissioner in Ekiti State. The resignation was accepted with effect from 27th January, 2011. Permit me to express the Company's deepest gratitude to Mr. Adebayo for his indelible contribution to the company's success even as we wish him greater success in all his endeavors
Retirement By Rotation
In accordance with the Company's Articles of Association, the following Directors, Chief Ephraim F. Faloughi, Mr. Oluseun Ajayi, and Mr. Bolaji Agbabiaka retire by rotation and, being eligible, offer themselves for re-election.
In compliance with the SEC Code of Corporate Governance, the Board has considered suitable candidates for appointment as Independent Director of the Company, and is pleased to recommend Col. Musa Shehu (Rtd.) for appointment to the position. Col. Musa Shehu (Rtd.) retired from the Nigeria Army in 1999 after several years of meritorious service in Nigeria, and on military peace keeping and observer missions outside Nigeria, including to Tchad Republic, Iran, and Iraq. In the course of his military career, he also served as Military Administrator of Rivers State between 1996 and 1998, and of Plateau State from 1998 to 1999. He is currently the Secretary-General of the Arewa Consultative Forum. Col. Musa Shehu (Rtd.) was found suitable for the position based on the Board's findings that he does not hold any share in the Company, has no professional or business relationship of any sort with the Company, is not related to any current or former employee of the Company, has no blood or business connection with any significant shareholder of the Company, and possesses such administrative and managerial skill and experience that will enhance the performance of the Board.
In line with our tradition of adequately creating wealth and rewarding our Shareholders appropriately, the Board of Directors is pleased to recommend a dividend of 3 kobo per 50 kobo share for the year ended. If the shareholders endorse this recommendation in this meeting, a sum of N156,112,718.00 representing 50% out of the Profit after tax of N308 million will be paid as Dividend to the Shareholders. I salute your sacrifice of the previous year in this regard and hereby assure you of further benefits in the future.
Sovereign Trust has become a hub to develop and retain best industry talents. We pride ourselves in the quality of people that permeate our workforce. Our philosophy is to entrench professionalism within our workforce and this has been yielding immense results.
Building on this, I recognize that we must continue to put our people at the heart of our operations and therefore will equip and continue to develop our staff to ensure that as individuals and collectively as a company, we are truly unique among our peers in the Insurance Industry.
Moving forward, we understand the unprecedented dynamism of the business world. Accordingly, our strategic direction will be crafted to proactively envisage the likely opportunities that are inherent in the Industry and mitigate against possible threats that may adversely affect our operations.
In this light, we have identified Information Technology as a veritable tool to build competitive edge in the industry and therefore will continue to direct huge investment in this direction.
Similarly, Capitalization issue must be addressed headlong on a continuous basis. Beyond our ongoing capitalization process, we will continue to fashion out more initiatives aimed at building up our capital base and driving our growth.
We also recognize the rapid changing nature of our customers' expectation. We are aware of the imperative of embracing innovation and sound initiatives toward meeting our customers' needs and creating bespoke services. This is a precondition to the attainment of our desired leadership of the Insurance Industry. In this light, we will continue to assess our service platform to ensure that they conform to the best in global standards and are flexible enough to meet our customers' expectation.
As the domestic economy expands, we are hopeful that the link between economic growth and common people will ultimately be established. This we believe should translate to increased standard of living for Nigerians and improved purchasing power. We expect more insurance awareness to be created and therefore will leverage on our expertise to create products targeted at the retail segment of our market. This segment of the market we believe is a blue ocean that is capable of driving our growth objectives and open up the potentials of the company.
We believe that the changes in our business environment present uncommon opportunities for operators. There is no illusion as to the effectiveness of our past initiatives and strategies in the recent turbulent years. This is evidenced by our performance for this year.
The project of building the Sovereign Trust of our dream with huge capabilities to create wealth for the Shareholders and meet up with expectations of all Stakeholders is ongoing and we are confident that this will become a reality in the shortest possible time.
Finally, Distinguished Shareholders, I will appreciate your joining me in expressing my sincere gratitude to our customers without whom our success story would have been a mirage. I also commend our staff for their unalloyed commitment to the course of this great organization. I thank you all and pray that God will continue to bless Sovereign Trust Insurance Plc and the Nation at large.
Chief (Dr.) Ephraim F. Faloughi (OON) (Thomas Ebiegberi Spiff ll)