New Telegraph

Regency Alliance: Operating milieu retards earnings

Regency Alliance Plc is grappling with reduced premium growth due to challenging operating environment. CHRIS UGWU writes




Despite the recapitalisation of insurance firms in 2007, insurance sector has continued to struggle with challenges such as dearth of appropriate human capital and professional skills, poor returns on investment, existence of too many fringe players and poor asset quality.



Other challenges include prominence of unethical practices, significant corporate governance issues, insurance premium flight, poor business infrastructural facilities, especially in the area of ICT and lack of innovation in product development. Also included are lack of awareness on the part of consumers on the uses/suitability of insurance products, low gross domestic product (GDP), per capita figures and poor corporate governance structures.


Notwithstanding that Nigeria is under daily threat from not only risks emanating from natural disasters such as floods and rainstorms, but also man-made risks such as security, Boko Haram, bandits, kidnapping and other heinous crimes like the recent #ENDSARS protests, which was hijacked by hoodlums loot warehouses are more compelling reasons why insurance should grow.


But penetration still remained a huge challenge, with some having to do with the culture and the general mind-set of people to insurance.


This negative perception that trailed the sub-sector has retarded the growth of insurance leading to the inability of majority of companies in the industry to pay dividend to shareholders for many years.


Market watchers attributed the inability of the sub-sector to rise above the nominal level to crisis of confidence. Besides, the few ones that raised high expectation for good results ended up reporting negative financial results.


Regency Alliance Insurance Plc is one of such companies that have got its fair share from the dwindling fortune of the sub-sector as the movement of its share price has remained below 50 kobo, courtesy of new price methodology that was implemented early this year.


Following the operational challenges, the shareholders had rejected to approve the 2018 dividend proposed by the board of directors with a directive that it should be ploughed back into the company’s general reserve.


The group, which had ended the financial year 2019 on an impressive and promising note, began recording decline from third quarter of 2020 as the harsh operating environment continued to hurt earnings following increased expenses.


However, the extensive economic crisis has seen the company along with other insurance participants badly beaten with Regency Alliance’s share price has remained at 22 kobo at the close of trading on Friday.





Regency Alliance ended full year ended December, 2017 with a drop of 54.95 per cent in a profit after tax to close at N275.361 million as against N611.199 million posted a year earlier. The group’s profit before tax declined by 45.84 per cent to N412.571 million in contrast to N761.701 million in 2016.



However revenue grew by 11.28 per cent to N5.583 billion in 2017 to N5.017 billion in 2017.

Based on the report the Board of Directors recommended a total dividend payout of N200,062,500 representing 3k per 50k share for eligible shareholders.



The company recorded a gross premium income of N5.9 billion in the 2018 financial year, as against N5.4 billion in 2017.


Profit before tax stood at N373 million in the year, as against N413 million in 2017, representing a decline of 9.68 per cent. On the other hand, profit after tax stood at N273 million in 2018 as against N275 million in 2017.



Claims expenses stood at N2.141 billion in 2018 as against N1.874 billion recorded in 2017, representing a growth of 14.25 per cent.




Regency Assurance Plc also declared a final dividend of 3 kobo per 50 kobo share, amounting to N200 million for the financial period ended Monday, December 31, 2018.


For the Q4 ended December 31, 2019 Regency Alliance gross premium written grew by 15.73 per cent to N3.9 billion from N3.4 billion in the previous quarter.



Profit before tax grew by 173.5 per cent to N696 million from N209.599 million in 2018. Profit after tax grew by 185.09 per cent to N598 million.


Regency Alliance Insurance Plc has reported a marginal growth for the first quarter ended March 2020.



The insurance firm in a report obtained from the Nigerian Stock Exchange said its profit after tax stood at N218.537 million during the first quarter from N213.721 posted in in 2019, accounting for a growth of 2.25 per cent.



Profit after tax stood at N269.266 million from N264.748 posted in 2019, representing a marginal growth of 1.71 per cent while gross Premium written was a 1.03 per cent growth from N2.029 billion in 2019 to N2,050 billion in 2020.



Regency has grown revenue by +9.71 per cent to N4.05 billion for the Q2 ended June 30 2020, from N3.69 billion in the previous quarter.


Profit before tax grew by +69.22 per cent to N670.11 million in 2020 from N396.013 million in 2019 while Profit after tax grew by +73.49 per cent to N550.46 million from N317.286 million in 2019.


Gross premium written stood at N4.056 billion in 2020 as against N3.697 billion in 2019, representing a growth of 9.71 per cent.


For the nine months ended September 30, 2020, the insurance company reported 8.43 per cent drop in profit after tax to N598.594 million from N653.727 million in 2019. Profit before tax stood at N684.508 million from N773.919 million in 2019.








WATCHpremium written was N5.287 billion in 2020 from N5.531 billion in 2019. Claim expenses (gross) rose by 25.70 per cent from N1.280 billion to N1.609 billion in 2020.
Refusal to approve dividend payment
Shareholders of Regency Alliance Insurance had last year refused to approve the 3 kobo per share dividend proposed by the board of directors of the company for the year ended December 31, 2018.


This decision to reject the cash dividend proposed by the board for the financial year was taken by the shareholders at the company’s Annual General Meeting (AGM) held in Lagos.




According to reports, at the meeting, when the shareholders were asked to vote to approve the 3 kobo dividend, they expressed to move against it. Instead, they asked the board to return the money into the company’s purse.



Confirming the development, Regency Alliance Insurance, in a disclosure to the Nigerian Stock Exchange (NSE) on Wednesday, June 19, 2019, said, “The shareholders at the meeting did not pass the resolution to pay dividend of 3 kobo per every share at the closure of the register instead the shareholders moved the following motion which was passed by the requisite majority that the total sum, which would have been paid in dividend, should be ploughed back into the company’s general reserve.”







Regency Alliance Insurance Plc has projected to achieve N4.279 bn gross premium income for the fourth quarter ending December 2020.


In its Q4 earning forecast obtained from the Nigerian Stock Exchange (NSE), the insurance firm also projected N730.716 million as profit after tax and N859.665 million as profit before tax for the period.


Other key figures in the forecast for Q4 2020 include; the projected sums of N2.82 billion for Net premium, N855.9 million for Net claims incurred, N928.65 million for Underwriting/Management Expenses, and N487.3 million for Net cash generated from operating activities.



According to report, the increase in projected Q4 2020 might be connected to the drive to meet up with recapitalization requirements for insurance firms in Nigeria.
The Chairman of the company, Baba Gana Kingibe, at the company’s 24th Annual General Meeting (AGM), said: “Our salient result of the economic situation has been an increase in both the number of claims and value therein throughout the insurance industry. In 2017, there were huge claims payout in oil/gas, accident and motor classes.”


With the economy set for more growth this year, the chairman said that the company was reviewing its expansion programme to make it compete effectively in the insurance space.


He said that the company also intended to increase its market penetration through the deployment of an e-commerce platform.



“We will always be guided by our corporate ideals and values of professionalism, integrity, commitment and efficiency as we create wealth for all our stakeholders while mitigating all associated risks that may arise,” he said.


Kingibe added that the company also intends to increase its market penetration through the deployment of an e-commerce platform.


“I want to assure that Regency Alliance Insurance Plc is here for the long haul. We have strong confidence that the dampened socio-economic climate is temporary and Nigeria remains a land of immense opportunities and prospects. Your company is positioned to make the best of the brighter future ahead. We will always be guided by our corporate ideals and values of Professionalism, Integrity, Commitment and Efficiency as we create wealth for all our stakeholders while mitigating all associated risks that may arise,” he said.



Last line


Effective risk management alongside a tailored product offering is vital to bringing more Nigerians into the market and boost insurance, but unless more focus is given to training new actuaries, insurance firms will continue to bear the brunt of the massive slow-down in economic activity as revenue from premium income drops significantly.

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