Banks invest N30bn in insurance consolidation

By Amanda Gonzalez,2014-08-11 20:18
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Banks invest N30bn in insurance consolidation

Banks invest N30bn in insurance consolidation

At least N30-billion fresh funds realized from the continuing insurance

    consolidation exercise will be traceable to banks with interests in insurance companies, industry records have shown.

    Recapitalisation trend in the insurance industry shows that some eight banks have played vital roles in ensuring that their insurance subsidiaries meet the sector’s new minimum capital requirement: N2-billion for life insurance, N3-billion for non-life insurance, and

    N10-billion for reinsurance business.

    The banks and the insurance companies where they have interests include Zenith Bank (Zenith General Insurance); Guaranty Trust Bank (Guaranty Trust Assurance); Union Bank plc (Union Assurance); Spring Bank plc (Guardian Express Assurance); Skye Bank

    plc (Law Union and Rock Insurance); Oceanic Bank (Oceanic Insurance); UBA Group (UBA/Metropolitan Life Insurance), and WEMA Bank (Great Nigeria Insurance).

    BusinessDay has gathered that continuing talks involving banks and insurance companies

    will produce more "bank propelled" insurance companies post-consolidation. These talks,

    analysts say, tend to favour banks as the twin-factor of time constraints and government’s

    decision not to extend the exercise has affected the bargaining power of firms seeking

    survival opportunities.

    In the last five years, Nigerian banks have in a bid to diversify their earning profile continued to own/buy insurance companies outrightly; acquire shares in an existing insurance company; cross share holding between the bank and insurance company; sign

    exclusive agreement with one insurance company, and sign non-exclusive agreement

    with more than one insurance company.

    It is expected that the involvement of banks in the insurance industry will boost the fledgling bancassurance regime in Nigeria . Bancassurance involves the distribution of insurance products through a bank’s distribution channels. Also known as Allfinanz "one-stop shop", it describes a package of financial services that can fulfill both banking

    and insurance needs at the same time.

    Experts say banks’ brand presence through massive advertising and multiple communications channels can facilitate higher profit margins and more effective service delivery.

    With the advantage of the synergy between banks and insurance companies, different

    insurance products can be tailored and targeted to specific segments based on the knowledge about customer’s spending patterns.

    However, Funmi Babington-Ashaye, managing director and chief executive, Cornerstone

    Insurance plc, says more collaborative efforts are needed to drive marked changes in

distribution and marketing of insurance products and services.

    According to her, insurance operators and banks need to forge more constructive alliances that will transform the fortunes of personal line insurance business through effective bancassurance channels.

    "Bancassurance is still in its developmental stage in Nigeria . However, about seven banks have bought insurance companies, and the experience of some of these companies

    has been good because they have a very cheap means of distribution and an existing market. Once Bancassurance is fully embraced in Nigeria , the personal line insurance products, which are presently untapped, will develop rapidly particularly with Nigeria’s

    huge population and market potential," she says.

    The finance sector has in recent times been witnessing more bancassurance ventures arising from banks’ desire to provide one-stop customer service to avail them

    opportunities to, among other things, package products tailored to suit their clients’

    needs; growth of revenue base from existing relationships; additional source of income that is risk free; increase in return on assets, and reduction in operating cost as well as enhanced customer loyalty. In the case of insurance companies, the attraction has been the sector’s quest to utilise banks’ distribution channels, brand image and existing customer relationship to sell insurance products.

    thNews from Business Day 30 January 2007






    FEBURARY 13, 2007


    All over the world growing has become trendy for most banks. Likewise in Nigeria as most banks have not only grown their asset base but improved their performance; Intercontinental bank is one such banks.

    The bank’s organic drive for growth is in consonance with its corporate vision to be the number one financial services institution in Nigeria with strong global presence. In the 2006 financial year, the bank’s asset growth curve was on the steep side at N403.7 billion, achieving a deposit base of N252.3 billion and gross earnings of N41.04 billion. It is no longer news that the bank had earlier raised its shareholders funds to N54.4 billion making it one the banks to achieve a boisterous balance sheet figure in the post consolidation era.

    Buoyed by its vision and encouraged by its remarkable achievements the bank was to hike its asset base to N616 billion within the first nine months of 2006 and is poised to join the big league in the banking industry. Analysts believe the outcome of its recent shopping spree in the stock market currently being verified by the apex bank CBN may stun market watchers as the bank is on the verge of making history.

    The third quarter result reveal significant rise of 184 percent in gross earnings better than its 2006 outing. It had grossed over N59 billion against the N30.5 billion of 2005. Intercontinental bank also bettered its pretax profits by 179 percent to N12.83 billion from N7.18 billion recorded in the corresponding period of 2005.

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