Some investors in Nigerian quoted firms have expressed worry over the stream of losses that has trailed the business of Guinea Insurance Plc in the last five years.
A study of the firm’s financial statements showed that it has recorded a cumulative five-year post-tax loss of N1.3 billion as of 2022. This figure is above the current N1.2 billion market capitalisation of the 65-year-old insurer as of Friday, June 9, 2023, based on data by the Nigerian Exchange (NGX)
According to the company’s audited FY 2022 report, Guinea Insurance posted the last profit of N251 million in 2017, after which it launched into the ‘Loss Expressway’ that has lasted five unbroken years.
The company posted a loss of N64.75 million in 2022, N23.48 million in 2021 and N227.67 million in 2020. The 2020 figure showed a drop from the 2019 peak of N795 million, after it had entered the ‘Loss Expressway’ in 2018 with N190.2 million. No dividend has been paid since the 5-year journey on the loss expressway, while gross premium hovered between N1 billion and N1.3 billion per annum. Cumulative loss per N1 share during the period was N21.53.
Take-off point
An examination of the firm’s financial statements during the five-year period showed that the persistent loss position occurred from key areas of operating and administrative expenses, tax under-provisioning and claims in 2018.
Operating expenses rose to N904 million from N674.7 million in 2017, representing a 34 percent increase; while legal and professional fees jumped 334.8 percent to N100 million from N23 million in 2017. Claims expenses gulped N170 million as against N63.8 million or 165.7 percent jump.
Furthermore, office running expenses consumed N145.3 million in 2018, compared to N84,8 million in the previous year, representing 71.4 percent. These item include car repairs and maintenance, ICT expenses and office maintenance. Since then, the company has not recovered from the caustic loss attacks.
Investors’ Reaction
The National Coordinator, Progressive Shareholders Association, Boniface Okezie, said investors expect the company they put their money to do well and create wealth for itself and the investors.
He expressed concern over the perpetual loss situation of Guinea Insurance, noting that the company cannot be seen to be doing well with such a level of performance.
“If the company cannot pay a dividend, let it show a strong balance sheet to boost the shareholders’ confidence in the management of the firm. You cannot be posting losses every year and not paying a dividend, then you say you are in business. That is not the way to go,” Okezie told THEWILL in a note.
He said the company must recapitalise and a handsome reward system was put in place to motivate the workers to seek business and attract more investors.
At the 64th Annual General Meeting of the company in Lagos in August 2022, Okezie had berated the board of Guinea Insurance Plc over its persistent financial losses and inability to pay dividend to shareholders.
Okezie bemoaned the yearly losses suffered by the company in its annual financial reports and payment of regulatory fees and other levies over infractions by the company.
According to him, the company’s consistent failure to pay dividends to shareholders does not encourage more investors to look at the direction of the firm.
“A man that was born 64 years ago is not a small man. He is a grandpa. Mr. Chairman, here we are, year in, year out we come to this place. If you look at the page convening this annual general meeting all items were listed, but there is no item related to shareholders. Nothing was mentioned about dividend to shareholders,” he said.
“Mr. Chairman going forward, what are the plans to return us to profitability that will entitle us to dividend? We need a thorough explanation. When will we be having dividend to all stakeholders?” Okezie queried.
The National Coordinator, Pragmatic Shareholders’ Association, Mrs Bisi Bakare, acknowledged the operating challenges facing the insurance industry. She however advised the Board and Management of Guinea Insurance to change the dwindling fortune of the company because “no one puts his or her money in a place that will not yield returns. You cannot be dispensing efforts for nothing”, Mrs Bakare said in a telephone chat. She added, “Guinea Insurance must stop foot-dragging in recapitlising the company if they mean business,”
Sympathising with Guinea Insurance, Chairman, Trusted Shareholders Association of Nigeria, Mukhtar Mukhtar, noted that the challenge the insurance industry is facing was created by the government whose policy directives allowed foreigners to corner huge insurance businesses in the country.
He also lamented the holco structure that allows banks to establish their own insurance companies, thereby thinning down the opportunities for other insurance firms to thrive.
He observed that the company had drastically reduced its loss position, which is a good omen. He however advised the company to take steps to prune down its loss position drastically, “Remember, some of the insurance companies reported hundreds of millions in losses. But my advice to Guinea Insurance management is that they should try as much as possible to prune down on expenses and cost of operations and devise better cost effective strategies to keep afloat,” the investors’ group leader.
We’re doing something
When contacted by telephone, a senior official of Guinea Insurance said the company was going through tough times because the bigger players had cornered the juicy businesses “which we do not have the mussels to compete with them”.
The official told this newspaper that Guinea Insurance believes in ethical practice and would not do what the others do just to get business. When asked if the company is considering recapitalising, the official said, “Just wait. The company will soon bounce back to profit. You will see something new in the next one and half years.”
While addressing the insurance and pension journalists at the Quarterly CEO forum in Lagos in March,.2023, managing director/CEO, Guinea Insurance Plc, Ademola Abidogun, said the company had continued to make underwriting profit every year. Having brought down its loss position in 2020, he said Guinea Insurance was positive of closing 2023 in strong profitability.
“If you look at how our loss after tax has reduced in the last three years, from N700 million to N200 million to N20 million, you will discover that based on what we are doing now, we will make profit by the end of the 2023 financial year.
“We are committed to reduce expenses and increase turnover, increase topline and manage underwriting properly with proper reinsurance. We are also looking at businesses that we take and we make sure that we don’t just take any business.
“We are very optimistic and very deliberate in our analysis. We track expenses, track businesses that we do, we do a lot of analysis to ensure that we change the story.”
He said that the company is committed to the satisfaction of customers and the insuring public with prompt settlement of claims as well as improved service delivery.
Accordingly, the company will continue to settle all genuine claims promptly and speedily.
Guinea Insurance paid the last dividend of N0.01 per share in 2010. The current share price is N0.20.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
