Insurance Firms & Capital Market Opportunities: Investors Perspective

In this Presentation Random Thoughts....Role within the financial and capital market space trip up What can trip up insurance companies looking to come to the capital markets… Market Expansion issues for the Financial Sector Leaders of the future.. The state of the market today Insured

Managing Fall-outs of Financial Reform Changing Face of Quoted Insurance Firms The free-for-all affair set to change quickly. Psyche of public about Industry shifting steadily Size still a problem and response to change slow Capital market welcomes the possibilities apparent In the sector

Our Role in the Market Space Built around an IR Program Intelligent Information for Investors; Prepare IR Publications & Presentations; Communicating Financial Results; Preparing & Disseminating Analyst Reports for Investors; Investment Community Relations Support Services; and Enhancing the Visibility of clients with all Stakeholders, esp. Shareholders;

Taking a Cue from Banking Interventions embracing IR is off the mark already…Why? is off the mark already… Why?

The Insurance Industry An Underdeveloped Sector (of Growth?) 48 players with over N213bn capital base post capitalisation Turnover of N98bn (2006) to go to N250bn (estimated from 2007 qtly results) Yet to achieve desired insurance density & penetration however.. Capital base insufficient to play in the critical sectors (A, O & P) Market is a small, tightly concentrated and slow growth one, with almost 70% of premiums split between Marine, Gen. Accident and Motor Ins policies. source: BGL/Afrinvest/NIA

Offers in market: Mkt Cap – N700b Change in perception & increased interest of Investors and shareholders alike…is igniting new activity …. N18 billion N15 billion N4 billion N10 billion and others are still doing underground work to come to the market. N10 billion N6 billion Source of info:Afrinvest

Market Expansion What to do at this Stage of the Growth Curve…. A number of insurance companies are beginning to expand their operation beyond the cities to catch a larger population of the market by offering them one form of insurance or the other. While some have seen market opportunities internationally by taking advantage of reforms in some parts of Africa to acquire other insurance firms, others are going to the grassroots.... Discerning Investors however will lean towards more measured operators, with a clear market focus and a deep understanding for the long term nature of the insurance market opportunity source: Afrinvest

Q Growth in Prices of Insurance Stocks…. BANKS Led the equities table compared to BANKS on many occasions with reasonable capital appreciation (gathering momentum). Market Cap increased from about N29bn in 2005 to over N676bn ($5.6bn) by March Yet its not Uhuru Q3 results being released by players suggest that the public has crossed the doubt phase and see the industry as a veritable growth sector… Yet its not Uhuru So what could go wrong for a firm? Info: Afrinvest

Coming to the Market trip up What can trip up a firm coming to the market? Poor results from sector players Poor record of claim settlement and service record/reputation Lack of ambition to go beyond N2-3bn capital base to position firm to play in sectors hitherto controlled by foreign firms and capacity to manage risks, people and processes… Reputation challenges, absence of niche and success stories..

Case Studies – Going anywhere? Moving from 1% to 5% contribution to GDP The leaders will be those who are able to build up adequate capital to build systems, people, processes that can deliver long term success Key players will develop an ability to pool huge funds and achieve a geometric growth to compete for new corporate and industrial insurable assets Risk Mitigation becomes a key Success Criteria Reputation in market means firms must match perception with reality.

Case Study 1 Niger Insurance Plc……..The industry sleeping giant. Established in 1962 (life) Current asset base > N8bn and a fully paid-up share capital of N750m. Built a legacy of trust and ethical values Moving ahead of its competitors to upcountry locations across the country. Last FYE paid N0.05/share and bonus of 1 for 5 off a 36% growth in premium and a 106% growth in PAT. Q2 June 2007 results show an 88% (N2b) increase in GP and a 135% (N354m) increase in PAT. While current results exceed projections the share price only recorded an 8% (7.25) appreciation from its Jan OP (6.70) Going forward, current operating results have surpassed projections and the share price has recorded a 58% appreciation from its January opening price to date. TRIP UP ISSUES: Risks to the companys growth and market dominance could arise from a drop in patronage by government agencies and parastatals, the perception of the company as a sleeping giant, the bullish penetration of the market by hitherto small insurance companies but now recapitalised to fund ambitious expansion plans. Risks to the companys growth and market dominance could arise from a drop in patronage by government agencies and parastatals, the perception of the company as a sleeping giant, the bullish penetration of the market by hitherto small insurance companies but now recapitalised to fund ambitious expansion plans. source: BGL

Case Study 2 NEM Insurance Plc…… Repositioning for Growth? Established in 1948 (General) and merged with Vigilant Insurance Company Ltd in 2006 NEM has an authorised share capital of N2.5bn, outstanding shares of 5.03 billion and a Shareholders Funds of N3.1bn. Change in financial fortune started in 2006 with a 45% inc in turnover from N0.6bn in 2005 and PAT of N0.85bn over a loss return of N2.267m. Q results show a Turnover of N2.344b and PAT of N0.57bn. Share price is 27% (N4.99) ATH above its Jan OP of N3.92. Price reps. a 21% drop from its June 2007 price of N6.32). Though involved in all classes of insurance, NEM has been able to carve a niche for itself in Life & Pension Insurance where it has an array of nine different products. TRIP UP ISSUES: Medium sized company with 10 branches but bullish in approach. Re-engineering of operations should help increase client services by reducing lead time for claim settlement and information dissemination. Its processes and procedures should be simplified by embracing IT and truly focusing on increasing customer interaction both online and offline. Medium sized company with 10 branches but bullish in approach. Re-engineering of operations should help increase client services by reducing lead time for claim settlement and information dissemination. Its processes and procedures should be simplified by embracing IT and truly focusing on increasing customer interaction both online and offline. source: BGL

Case Study 3 Crusader Insurance Plc………..Highly reputable.. Established in 1956 (General & Life) Shareholder's fund of N5.5bn (ASC > N4bn), Asset base > N9bn with a very strong reserve base and is considered one of the highly capitalised insurance companies in Nigeria. A reputation built on its efficient service delivery and prompt claims settlement Q3 operating results (Sept 07) show a Premium of N1.81bn against N1.1bn (06) while PAT increased > 100% to N0.57bn. Share price closed at N6.70, 181% from its Jan OP (N2.67). This is a 346% increase from its close of N1.68 though it hit N6.40 on (12% inc). Going forward, current operating results have surpassed projections and the share price has recorded a 58% appreciation from its January opening price to date. A MODEL for the MARKET: Crusaders capital base helps make the case for increased capital to allow firms undertake a wide scope of risk underwriting across general business, special risks (like Oil & Gas, Aviation and Engineering/Machinery), Individual Life, Group Life and pension benefits plans (it currently does).. Crusaders capital base helps make the case for increased capital to allow firms undertake a wide scope of risk underwriting across general business, special risks (like Oil & Gas, Aviation and Engineering/Machinery), Individual Life, Group Life and pension benefits plans (it currently does).. Additional Info: BGL

Close Looking Beyond Penny Stocks Penny Stocks: Of the 27 stocks listed, only 2 are not Penny Stocks: (WAPIC N12.90 & PRESTIGE N10.93). Next 3 are CRUSADER N7.50, STACO N6.82 and LawUnion N6.80. Performance indices now includes soft issues and not only financial performance. Market expansion both locally and internationally, particularly in the West Coast market exposes firms to new opportunities and risks.. Focus on product development and research to come up with products that will meet customers needs e.g. Auto Tracker policies, Lost baggage & travel Ins… Impact of human capital in utilising the new capital injection into the industry by focusing on staff recruitment, training and retooling…. Additional info: Afrinvest

Investors Relations Managing Soft Issues…. Not PR or Spin but a well managed market engagement that makes it easy for investors to handle uncomfortable news when it occurs …..to build & nurture its financial reputation.