Oyetunji: Insurance Firms Need Consolidation for Better Performance

Femi Oyetunji

Dr Femi Oyetunji, is the outgoing Group Managing Director/CEO of Continental Reinsurance. A Manchester University trained statistician and first Actuarial scientist in Nigeria, Oyetunji is retiring after completing his 10-year tenure. In this interview with Ebere Nwoji, he speaks on his journey, contributions to the development of the entire insurance industry and what he wants the future of the industry to be. Excerpts:

You have spent about 10 years now in Continental Reinsurance as the Group Managing Director(GMD), could you tell us how the journey has been and how you were able to surmount the challenges to reposition the company for greatness?

Yes, on the 3rd of January 2011, when I first got into Continental Re office at St Nicholas House, Lagos, I knew I was going to face some challenges because we had only two existing reinsurance companies in Nigeria after the last recapitalisation exercise. At that time, the Deputy Managing Director was a Nigerian, the Chief Financial Officer was an Ivorian and the Executive Director, Operation (who is still with us now) is from Zimbabwe, and myself Nigerian. In Lagos, we had people from different parts of Africa; our shareholders were Americans, South Africans, and Nigerians, so it was not just Nigerians. At the time I took over in 2011, we had a branch in Douala and a branch in Nairobi. Even in terms of location, we were multinational.

I got in there and I saw a multinational company but some people saw a small Nigerian company. My initial challenge was to have a paradigm shift in philosophy and mentality, to see us not just as a small Nigerian brand but a multinational brand. Things were as bad as on Fridays, in Douala, Nairobi people will wear Ankara tops to the office. I didn’t think that was what Continental Re was all about, even from the name, the founders knew what they wanted. We will start work at 8 am Lagos time, it was 10 am in Nairobi.

People in Nairobi couldn’t start work until 10am their time because everything was centralised here in Lagos and not thinking about the pan-African nature of our businesses in the way we run our offices. So, it was a great challenge to get people’s mind away from a narrow focus to a broader picture. As a leader, the first thing was to envision. Therefore, I came up with the vision of being the premier and African reinsurer. We had everything in place, but we were not thinking pan- African and international. Of course, the most difficult situation is to change people’s mindset from where they have been.

This was very challenging, but after 10 years, not only have we succeeded in becoming a truly pan-African and a well-respected brand, we have internalised the philosophy of being pan- African in all we do as an organisation. Ten years is such a short time for that kind of transformation. The achievements are not just by our assessment, but last year we commissioned a global perception company to see what people think about us and how we are perceived. The international standard score is 73, but we achieved far way 79. So, there is documentary evidence that we really transformed from being a small Nigerian reinsurance entity to a well-respected Pan-African brand.

You recently completed a befitting head office building here in Nigeria, apart from this, what other achievements can be traced to your 10 years as GMD of this company?
In 2012, I attended a meeting of an insurance summit in Brazil, and the United Nations made a presentation in terms of Principles of Sustainable Insurance (PSI) and Global Warming. And one of the things I find most disheartening in Africa is that there is a disaster, huge economic losses but very little insured losses because of low penetration of insurance. So, for me, we need to prevent those natural disasters which are not so natural as it were but being consequences of what we do. So, I signed Continental Re up to the United Nations PSI in 2012 and we showed so much commitment to the extent that one of our colleagues was elected to the board in Geneva, to really demonstrate our interest in climate change because if the climate goes, and disaster starts happening, of course, it will end up in a problem for the insurance industry. Therefore, it will be self-indicting, if we see danger and do nothing to prevent it. So we became the first African reinsurer outside of South Africa to sign up to United Nations PSI.

Again, in 2012, we opened a branch in Abidjan, in 2013 we opened in Tunis, in 2014 we opened a subsidiary in Botswana, and along the line, we converted a branch in Nairobi to a subsidiary. It was a strategic plan. We sectioned Africa into homogeneous groups because one of the key propositions is a customised experience. After all, we realised that your customer can not have that experience unless you are close to the customer. So, being who we are, we see our self as thought leader and pacesetters, so we moved away from the traditional pattern of a Reinsurance company, of creating branches all over the place to creating subsidiaries. Therefore, we had a rapid expansion that happened in the first five years, which were deliberate actions because we believed, that was the way to go. In Continental Re, we believe that we must keep African premiums within Africa.

We do not believe that anyone else will develop our continent for us. We have to develop our continent, so we must put things in place to ensure we solve our problems by ourselves. We are closer to the problem and we are in a better position to solve them. So, we created a platform whereby stakeholders can sit together, discuss common problems and proffer solution. We started the platform in 2014 in Mombasa Kenya, which brought leaders in the industry from across the continent. It provided an opportunity to find a solution to Africa related issues. It has become a taught leadership platform where great minds and leaders in the insurance industry, as a continent, look forward to every year.

Driving the pan African agenda is something to be proud of and that is what Continental Re has been able to establish. In Continental Re, we are not yet A-rated but we must operate as an A-rated company. The reason why we are not A-rated is the sovereign risk of the countries in Africa. As an insurance company, we look for scales, support. I believe we have the best Analytical team in the continent, we have the best engineering team here in the continent, the best underwriting procedures and skills. So, though we are not A-rated as per the size of our balance sheet, we have the competence that people are looking for. Because we are close to the risk, we can assist them in getting a solution for their clients. We behave like an A-rated company and have the skills that the giants have in addition to proximity to risks. In terms of providing a solution to our clients, the brand survey and perception we are number one.

Again, in balance sheet size, four reinsurance companies are ahead of us. In terms of rating, three other companies have a higher rating than we have. In Continental Re, our watchword is that every genuine claim must be paid and must be paid promptly. In Continental Re, we have this special arrangement, where we attract Africans in the Diaspora back to Africa, and that is one of the reasons we went from branches to subsidiary network. We made sure that we have platforms all over the continent, where we can attract people from Europe, United States (US) to come back to Africa, bringing their skills. We must as an industry attract new skills which involve a lot of money, and that is why adequate capitalisation is key in growing our industry.

Now, let’s look at numbers in terms of your achievements while leading the pan African institution?
When I joined Continental Re in 2011, almost 70 per cent of our premium income was from Nigeria not even from West Africa. The other 30 per cent were from Douala and Nairobi. When you look at the various economies not necessarily about insurance, like investment and properties, everything is about diversification. Having so much concentration in Nigeria was not sustainable, so we set ourselves a target to turn it around and have 40 per cent from Nigeria and 60 per cent from outside Nigeria. We have grown rapidly in Nigeria and over the past 10 years, we have been able to achieve what we set out to do, as seen from the rapid expansion we had between 2012 and 2015.

In 2011, we wrote N11.6 billion premium and we had a profit of N1.6 billion. However, over the 10years, we grew the premium income in five-folds and the profit in three folds. We created employment, we almost doubled our numbers. In 2011, we were 51 in the three offices we had then but right now we have 94 people in all the offices on the continent. While we are still growing, we have doubled productivity in premium income per employee. It’s been a good run. We achieved these through hard work and the expertise we have been able to bring into the business.

You have watched the market grow over the last 10 years, with a lot of transformation, which of the reforms excites you?
There have been great transformations in our industry over the last 10 years, not because am an Actuary but because it was an anomaly that we didn’t have actuaries operating in this industry and we have many of our offices writing annuity business. We have a lot of actuarial involvement, which means we have been more scientific, more analytical in our approach to risk management and risk-taking. We have come a long way off ‘if I know you and you know me, we do business.’ In terms of insurance penetration, life and non-life insurance, development in healthcare products, and digitalisation, I can say a lot has taken place. This is the best time to work in this country particularly at Continental Re because the opportunities are immense. If we proceed along the current trajectory, we see a lot of new products and a new approach to doing things. We are at a very exciting time where we marry experience with technology, and I believe the insurance industry in this country is set to take over.

You have seen it all, what would you like to see happen in the nation’s insurance industry after your retirement?
I am going to say the same thing I said in 2005. If we don’t reduce the number of insurance companies in this market, we are not going anywhere. My personal belief is that 15 to 20 well-capitalised, skilled insurance companies will transform the industry. What I will like to see is insurance companies talking to each other, looking for synergy, and saying, let us come together. The biggest threat at the moment is that global players with big capital and all that it takes to drive growth are here and taking a position. At the end of the day, they will take away the expected benefits. We can clearly see the danger, having seen the trend. Why we have not seen many of them at the moment is because of the economic situation. Once the situation improves, the big players from America and Europe will come in and dominate, and that is where the benefits will go. If the global players are based in the US, UK, or Germany, they will take the benefits to those places.

What I will like to see is consolidation, having fewer insurance companies that have the requisite skills, the analytics, the technology and the products that people want. That is what will move us from the current less than one per cent penetration to at least double of that size at first, then we can get to five per cent, 10 per cent and more. Imagine the kind of industry we will have when the penetration gets to five percent!
There is a need for reinsurers and more big players. The only reason people go outside to place their risks is that we have exhausted what we have domestically. There is the local content law that we should take advantage of, but because the capacity is not there, we go outside, and we cannot overexpose our balance sheet to a single risk. There is a limit to what we can take. The recent licensing of a new reinsurance company by the National Insurance Commission (NAICOM) is a welcome development. I believe that we should keep Nigerian premium within Nigeria and African premium within Africa. We can use those premiums to build hospitals, build roads, and build other infrastructures and technology within our societies. Nobody will bring dollars from the US to build schools or roads for us, let us keep what we have within the economy.

There is this impression in the market that Continental Re is no more a Nigerian company. What is your take on this?
We need to guide against detractors and de-marketing in this industry. The initial interest in having a new building was to demonstrate the company’s ability. Now, it is to prove to people who are saying that we are taking Continental Re out of Nigeria to understand that we are committed to the Nigerian market. This structure cost us a lot to build. There is absolutely no reason for putting this building up if we are leaving. Do not forget that Continental Re is regulated by NAICOM; Continental Re is a Nigerian registered company, we pay taxes to Nigeria, and over 15 per cent of our work force are Nigerians. So, our commitment to Nigeria is permanent. To clarify, we restructured the capital of the company to Mauritius because one of our main objectives is to become an A-rated company. If the capital is still registered here, we would be seen as a Nigerian company and our rating is limited by Nigerians sovereign rating. The whole capital restructuring and financial re-engineering we did is to pursue our desire to be an A-rated company. In terms of business processes, regulation, and people we are more Nigerian than many others are claiming.