INTRODUCTION
Distinguished Shareholders, fellow Board members, representatives of the various regulatory bodies here present, members of the Press, ladies and gentlemen, it is my pleasure to welcome you all, on behalf of the Board of Directors, to the 29th Annual General Meeting of our company, Sovereign Trust Insurance Plc and to present the Annual Report and Accounts for the period ended December 31, 2023 for your consideration.
The socio-political and economic events that characterised business operations in 2023 cannot be easily forgotten with its attendant implications on sustainability and profitability of businesses both at the global and national stage.
Our resolve to remain financially viable and profitable as a business entity has been the driving force behind the resilience we brought to bear in the year under review. Permit me to conduct a brief review of the global and domestic environment which shaped our operations in year 2023.
THE GLOBAL ENVIRONMENT
The Russian-Ukraine war which broke out on February 24, 2022, still continued in the wake of 2023 without any clear sign that the war will end anytime soon despite entreaties from well-meaning world leaders and concerned parties calling for ceasefire from both warring nations. In the same breath, the Israel-Hamas war which began in October 2023, in the Gaza Strip still pose a threat to world peace and stability.
The year also recorded significant number of natural disasters as a result of severe climate change in the world. 2023 witnessed unprecedented global temperatures and extreme weather events, underscoring the urgent need for collective action to address the climate crisis. Despite growing awareness and international agreements, efforts to mitigate climate change remain insufficient, risking catastrophic consequences for ecosystems and human societies worldwide. Urgent measures to reduce greenhouse gas emissions and adapt to changing climatic conditions are essential to safeguarding the planet’s future.
Tensions between the United States and China escalated in 2023, driven by geopolitical rivalries and strategic competition. Despite efforts to ease tensions through diplomatic channels, incidents such as the Chinese surveillance ballon crossing into United States airspace heightened mistrust and exacerbated bilateral frictions. The lack of effective communication channels between the two superpowers underscores the challenges of managing complex security dynamics in the Indo-Pacific region.
On the business angle, the rapid advancement of artificial intelligence (AI) presents both promise and peril for society. While AI innovations hold the potential to revolutionize various industries and address complex challenges, concerns about ethical implications and societal disruptions have intensified. The need for responsible AI governance and proactive measures to address potential risks remains critical in navigating the evolving landscape of AI technology.
In a historic shift, India has surpassed China as the world’s most populous country, with an estimated population of 1.43 billion people. This demographic change has significant implications for both countries’ economic prospects and social policies. While India’s youthful population presents opportunities for economic growth, China faces challenges associated with an aging population and declining workforce. The contrasting demographic trends could reshape the balance of power in Asia in the coming decades, highlighting the importance of effective policymaking in harnessing demographic advantages.
In West Africa, democratic government in Niger Republic was derailed by military coup that led to the removal of President Mohamed Bazoum in 2023. This coup with previous ones in Mali and Burkina Faso obviously created tensions that posed challenges to democratic aspirations and regional stability, underscoring the fragility of transitions to authoritarian rule.
DOMESTIC ENVIRONMENT
Quite a number of significant events marked the domestic terrain in 2023 in Nigeria. The year was a very significant one for the country as citizens went to the polls to elect another President that would take charge of the affairs of the country for the next 4 years.
Penultimate to the general election was the introduction of new naira notes and the withdrawal of the old N200, N500 and N1000 notes respectively. However, the new notes were in short supply, causing significant economic disruptions which later led to pockets of protests in several cities of the country. The year also witnessed the removal of the long-debated fuel subsidy.
The Central Bank of Nigeria also (CBN), also announced the unification of all FX windows into the Investors and Exporters (I&E) window. This move aimed to streamline the Nigerian FX market, but it resulted in the naira’s value fluctuating significantly.
The country’s inflation rate rose from 18.85% at the start of the year to 19.6% by the first quarter of 2023, and ended the year at 28.20%. Rising interest rates and a stronger US dollar made it more expensive for countries to borrow, particularly those with high debt levels. This put additional pressure on emerging markets and developing economies. Nigeria’s limited access to foreign currency worsened inflation. In addressing the situation, the Central Bank of Nigeria introduced policies aimed at reducing inflation by increasing the Monetary Policy Rate, (MPR).
THE INSURANCE INDUSTRY
The insurance industry on a global scale was faced with a moderate pricing pressure occasioned by economic and social inflation. It was a year where insurers had to bring to bear a high level of resilience amidst economic volatility due to rising interest rates and inflation. In the United States, most underwriters had the challenge of dealing with catastrophe and liability risks due to incessant natural disasters.
One key element that helped most underwriters navigate the boisterous insurance marketplace was the adoption of a strategic underwriting discipline which meant applying sound underwriting principles in risks valuation, risk quantification and corporate responsibility. Alternative risk transfer solutions also gained traction across both preferred and non-preferred risk types.
Overall, the insurance landscape was characterised by economic inflation, slow supply chain recovery, rising labour costs, extended recovery periods while the regulatory environment became more intricate, focusing on insurer solvency, cyber incident disclosures and the application of generative AI among other issues.
The Nigerian Insurance sector at the close of business in year 2023 achieved 35% growth over what it achieved in 2022 in terms of premium generation. From N736.2 billion premium generated in 2022 to over N1 trillion premium in 2023. With this, the long-awaited N1trillion Gross premium written set by the National Insurance Commission for the industry was finally achieved.
Furthermore, the net claims recorded by the industry was N669.4 billion with the non-life component contributing N329 billion while the life arm recorded N340.4 billion. Again, total assets of the sector during the period stood at N2.67 trillion while capitalization stood at N851billion in 2023.
The International Financial Reporting Standard IFRS 17, became operative on January 1, 2023 in accordance with the deadline set by the National Insurance Commission for operators in the insurance industry. The methodologies, disclosure and nomenclatures in financial reporting for the insurance industry is now expected to be carried out in line with the new standard.
Furthermore, NAICOM unveiled a comprehensive 10-year strategic plan aimed at transforming the insurance sector. The plan, announced at the 2023 National Insurance Conference, laid emphasis on seven strategic pillars, namely; regulatory transformation, risk-based capital models, insurance promotion and adoption, product diversification, distribution channel optimization, digitalization, talent development, and supporting Nigeria’s economic transformation.
There was an improvement in regulatory and technological advancement for the industry in 2023. NAICOM’s strategic plan, (2021-2023), laid the groundwork for this development. The key initiatives included the implementation of project E-regulation, the operationalization of the Business Process Management Solution (BPMS), and the NAICOM portal which enhanced the regulatory framework and digital capabilities of the industry.
As part of its effort to deepen insurance penetration and address financial inclusion in the Insurance industry, NAICOM licenced eight MicroInsurers and four Takaful companies. The move is expected to enhance the availability of insurance products and services while also increasing local insurance capacity in the country.
OPERATING RESULTS
In spite of the challenging macro-economic environment that characterised the year under review coupled with the dynamics of the new financial reporting standard, our company grew its insurance revenue by 23.1% from N15.7B in 2022 to N19.3B in 2023. The Insurance Service Expenses in line with the new accounting standard grew by 21.7% from N6B in 2022 to N7.3B in 2023. Furthermore, our Investment Income increased from N548M in 2022 to N819M in 2023, representing 49.3% growth. In the area of claims administration, the company paid a total of N3.3B in 2023 as against N3.2B in 2022.
The company’s total asset grew from N17.2B in 2022 to N22.8B in 2023, representing 33% increase. our total equity rose by 31% from N10.4B in 2022 to N13.6B in 2023. This is largely due to the success recorded in our Rights Issue exercise. In addition, we achieved a Profit Before Tax (PBT) of N1.42B in the year under review.
It was indeed a challenging year for many businesses, but the fundamentals of our company are strong, and this is buttressed by our capacity to remain profitable despite the harsh economic conditions prevai l ing in the operating environment.
With this result, we remain a profitable brand. We will continue to re-engineer our strategy in line with current realities and will not rest on our oars but continue to improve on our performance.
RIGHTS ISSUE
It is my pleasure to appreciate you all for the success recorded in the last Rights Issue exercise embarked upon during the year under review where we raised the sum of N1.4B and grew our paid-up capital to N7.11B. We are set to consolidate our recapitalization pursuit in order to achieve the objective of ensuring improved and qualitative capital base capable of attracting and retaining robust business opportunities.
DIVIDEND
In line with our commitment to delivering returns to our shareholders, the Board of Directors is pleased to recommend a dividend of 3 kobo per 50k share. If this recommendation is endorsed by the shareholders at this meeting, a total sum of N426.7million out of the Profit After Tax will be paid as dividend to all our shareholders.
BOARD
Resignation
Mr. Jude Modilim, Executive Director, Technical Operations, resigned his appointment as a member of the Board on June 15, 2023. We thank him for his contributions while he was with us and equally wish him well in his future endeavours.
Re-election
In accordance with the provisions of the Articles of Association, the Directors to retire by rotation at this 29th Annual General Meeting are Mr. Abimbola Oguntunde and Mr. Shedrack Odoh. The retiring Directors, being eligible, have offered themselves for re-election.
Appointments
May I also in the same vein inform this gathering that Mr. Kayode Adigun and Mr. Emmanuel Anikibe were appointed to the Board on October 30, 2023 and November 22, 2023 as Executive Directors Finance and Corporate Services and Technical Operations respectively. We are very confident that their wealth of experience would set a new and progressive pedestal for the company in the years ahead. Kindly join me in welcoming them to the Board as we wish them every success in their new positions.
FUTURE OUTLOOK
Following a change in administration in 2023, Nigeria stands at a pivotal point with a unique opportunity to return to a sustainable and inclusive growth path going by the fact that the government has recognized the need for a change in the course of action and has undertaken key reforms to restore macroeconomic stability and growth. These reforms coupled with the rise in global oil prices will help to reduce fiscal pressures and realign critical macroeconomic distortions that have hindered the country’s economic growth in the past.
Nigeria’s huge economy and growing young population offer great incentives to businesses in the country. The potentials in the economy are enormous and if well harnessed with a high level of political stability as we have witnessed in the last 25 years of democratic governance, the opportunities will remain boundless. All these will bring about renewed interest for the insurance indus try with more participation from international investors.
We would continue to deploy resources in line with our strategic blueprint to create more innovative and affordable products that will continue to meet the need and aspirations of our customers. Our strategic direction will be designed to proactively envisage the likely opportunities that are inherent in the industry and mitigate against possible threats that may adversely affect our operations in the coming years and beyond.
The Company will remain resilient and innovative in charting new avenues for growth and increased profitability. We will also remain committed in delivering value to all our stakeholders despite the numerous social, economic and environmental challenges faced by the communities we serve. Our continued success has been achieved through financial discipline and unwavering support of all our stakeholders. Our continuous effort to further increase our capital base is considered a veritable exercise that will improve our underwriting capacity and subsequently lead to improved profitability.
Technology continues to be a major platform for speedy distribution of products and services and we will consolidate our efforts in ensuring that all aspects of our operations are advanced in line with latest technology including the use of AI that will ascertain adequate delivery of our services at the doorstep of our customers.
CONCLUSION
Distinguished shareholders, ladies and gentlemen, the dynamism of the business environment will continue to pose its challenges and opportunities for operators, but our strength is always built on applying the right approaches and strategies capable of achieving optimal operational efficiency and performance. Sovereign Trust Insurance Plc is well positioned to take advantage of the opportunities that lie ahead.
Finally, Ladies and Gentlemen, I want to thank our numerous stakeholders, especially our policyholders for their confidence and trust in the company and assure that we would continuously strive to keep our organization on the path of growth. Permit me to use this medium to express my sincere gratitude to my colleagues on the Board for their unwavering interest in the affairs of the company. I equally would like to acknowledge the unrelenting enthusiasm and commitment of staff and Management to the success of our company. We have every reason to thank the Almighty God for being our pillar of support over the years.
As we will be celebrating our 30 years anniversary of being a strong brand in the insurance landscape in Nigeria come January 2025, I want to urge you all to keep believing in us as we continue to keep the dream alive in providing insurance and financial services of global standards. With your help and support over the years, we have come this far and we can only continue to count on you for the journey ahead as our destination begets a better hope for the future.
Thank you all and God bless our country and our dear company in particular.
OLUSEUN O. AJAYI
CHAIRMAN