Transcript an overview of the non-oil sector and opportunities for the insurance

AN OVERVIEW OF THE NON-OIL
SECTOR AND OPPORTUNITIES FOR THE
INSURANCE INDUSTRY
August, 2016 / Lagos
Kunle Ahmed
Contents
2 |
1.
Overview of
Performance
2.
Declining Performance of the Oil Sector
3.
Overview and Opportunities for Insurers in
Non-Oil Sectors
4.
Case Study : Kenya and South Africa
5.
Challenges of Insurance Penetration in the
Non-Oil Sectors
6.
Conclusion
Nigeria
Insurance
Industry
Nigeria would have been a more
highly developed country without
the oil. I wished we'd never
smelled the fumes of petroleum
3 |
1
Overview of the Nigeria Insurance Industry
Nigeria Insurance Industry performance is at a CAGR of 18%
Total Insurance Premium (N'm)
350
300
250
200
150
100
50
0
2006
2007
Motor Insurance
Marine & Aviation
Life
2008
2009
2010
2011
Fire Insurance
Workmen Compensation
Miscellaneous
2012
2013
General Accident
Oil & Gas
Total 2014 GPW was made up of 37% Life premium and 63% Non-life
Oil and Gas is currently the single largest contributor to Non-life at 18% followed by Motor at 15%
Workmen compensation is the smallest at 0.1%
5 |
Source: NIA Digest
2014
Nigeria’s insurance sector underperforms compared to peers
Country
Total GPW
($’mn)
Penetration
(%)
South Africa
Morocco
Egypt
Nigeria
Kenya
Algeria
Angola
Namibia
Tunisia
Mauritius
United States
United Kingdom
France
Africa
Global
49,159
3,400
1,968
1,790
1,784
1,597
1,142
931
888
766
1,280,443
351,266
270,520
68,974
4,778,248
14
3.2
0.7
0.3
2.9
0.7
0.8
7.2
1.8
6
7.3
10.6
9.1
2.8
6.2
Life
Penetration
(%)
11.4
1.1
0.3
0.1
1
0
0
5
0.3
4.1
3.0
8.0
5.9
1.9
3.4
Non-Life
Penetration
(%)
2.7
2.1
0.4
0.2
1.9
0.7
0.8
2.2
1.5
1.9
4.3
2.6
3.1
0.9
2.7
Density
($)
925
102
24
10
39
40
52
396
80
613
4,017
4,823
3,902
61
662
Africa and Global average insurance penetration is 9x and 20x that of Nigeria respectively, even
though Nigeria is Africa’s largest economy
There is a need to immediately address the decline in the Nigerian Insurance Industry as it is lagging
behind Global and African peers
Despite pockets of success recorded, Nigerian insurance market still has a long way to go in getting
the buy-in of the average Nigerian. Indeed, insurance still currently appeals more to people
employed in the formal sector (despite compulsory insurance legislation)
Source: 2014 SwissRe Report
6 |
…. with insurance density at $10 premium per capita, also among
the lowest on the continent
2014 Insurance penetration (%)
2014 Insurance density ($’000)
UK
South Africa
USA
UK
North America
France
France
USA
Oceania
North America
Europe
Europe
South Africa
World
World
Oceania
Asia
Asia
Latin America & Caribbean
India
China
China
Africa
Latin America & Caribbean
India
Kenya
Kenya
Africa
Nigeria
Nigeria
0
2
4
6
0
5
10
15
* Insurance density is a per capita metric, computed as total insurance premium divided by the population.
7 |
Source: SwissRe 2014 World Insurance Report; McKinsey Global Insurance Pools;
2
Declining Performance of the Oil Sector
Oil & Gas contribution to GDP declined from 17.5% in 2011 to
6.4% in 2015
Sectorial contribution to GDP
9 |
Source: Nigerian Bureau of Statistics
Includes Oil
&Gas
Stagnate and declining contribution of oil & gas sector to the
economy from1981 - 2015
*Contribution of Oil & Gas vs. Non-Oil Sector to the Annual GDP (1981-2015)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Oil and Gas
*Rebased GDP Figures
10 |
Source: Nigerian Bureau of Statistics
Non Oil & Gas
With the decline in global oil prices, growth in industry revenue from oil
& gas is expected to fall below its past 10-year stagnate of 18%
Avg Price of Brent Oil ($)
120
100
80
60
40
20
0
Insurance Industry Premium (N)
350,000,000
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
2006
2007
2008
2009
Total Premium
11 |
Source: NIA Digest, US. Energy Information Administration
2010
2011
Oil & Gas Premium
2012
2013
2014
3
Overview and Opportunities for Insurers in
Non-Oil Sectors
Non–oil sectors accounted for over 90% of 2015 GDP, with
Agriculture, Trade, Info comm. & Real estate contributing ~60%
ACTIVITY SECTOR
Agriculture
Mining and Quarrying (Exc Oil & Gas)
Manufacturing
Electricity, Gas ,Steam And Air
Water Supply, Sewage, Waste Management And
Remediation
Construction
Trade
Accommodation And Food Services
Transportation And Storage
Information And Communication
Arts, Entertainment And Recreation
Financial And Insurance
Real Estate
Professional, Scientific And TechAdministrative & Support Services
Public Administration
Education
Human Health And Social Services
Other Services
Oil and Gas
*Rebased GDP Figures
13 |
Source: Nigerian Bureau of Statistics
%
%
*Contribution Contribution
1981
2015
12%
21%
5%
0%
19%
9%
1%
1%
2%
8%
9%
1%
4%
16%
0%
0%
4%
19%
1%
1%
11%
0.2%
5%
4%
2%
0%
6%
2%
1%
1%
4%
3%
9%
4%
0%
3%
2%
1%
3%
6%
CAGR
23%
8%
19%
21%
12%
18%
24%
23%
17%
20%
29%
19%
24%
24%
23%
18%
21%
19%
27%
23%
Agricultural sector is currently the single largest contributor to
GDP; it remains largely under-tapped
Employs more than 30% of the population, with
majority participating in sustenance farming
Despite its large contribution to the country's GDP,
the sector requires deep operational expertise,
access to power as well as good transportation
network.
Nigeria
remains
one
of
the
most
promising
agricultural producers in the world
Importation of food stuff is projected to reduce by
at least 50% by 2020
Growth
is
to
advancement
be
and
driven
by
technological
government
support
(infrastructure and funding)
Agricultural Insurance accounts for less than 1% of
industry premiums, with NAIC being the lead
underwriter of agricultural products
Huge opportunities exists in the unsubsidized risks and micro-insurance.
14 |
Source: Trading Economics; McKinsey Global Insurance Pools; World Bank ; NAIC; NIA; NBS
Trade & Transportation abounds with opportunities as it
accounted for 20% of the GDP in 2015
Trade sector is made up of two
major components namely internal
and external trade, with both largely
dependent on air, sea and land
transportation.
Trade and Transportation sectors
are estimated to be bigger than
the Oil and Gas sector and
contributes 20% to GDP.
With consumer spending in excess of
about $100 billion a year and a fast
growing
middle
class,
trade
particularly retail trade presents a
opportunity to drive economic
growth, job creation and wealth
These sectors create an inroad for
smooth flow of foreign direct
investment (FDI) into Nigeria and is
forecast to grow at about 25.4%
rate annually.
It is estimated to have attracted
over N205.4 billion ($1.3bn) in the
last 2 years
Penetration into the Medium, Small and Micro Enterprises in this sector presents an
opportunity for insurance companies
15 |
Source: Nigerian Bureau of Statistics, Federal Ministry of Industry, Trade and Investment
Information and Communication Sector growth is driven by
“The Big Telcos” and the Motion Picture industry
Made up of Telecommunication, Publishing, Broadcasting and Motion Picture
The sector has grown at a 34–year CAGR of
20% and it contributed ~11% of total 2015 GDP
Nigeria has one of the largest telecom markets
in Africa, which attracts considerable foreign
investment annually
Nigeria movie industry is estimated to be worth
over $4 billion, the second largest in the world
and currently employs over 1 million people
More than 50 movies are produced weekly
Nigeria has the most competitive fixed-line market
Market share by Operators
in Africa featuring 1 indigenous and 3 foreign
21%
owned mobile network operators and over 80
39%
other
15%
companies
licensed
to
provide
fixed-
telephony services
Hundreds of companies, many of them small and
24%
Airtel
Etisalat
Globacom
localized, provide varied telecom and valueMtn
added services in an effectively regulated market
Insurers can focus on tailoring products to suite celebrity needs and lifestyle as
well as penetrating the SME space in the telecoms sector
16 |
Source: Nigerian Communications Commission, Fortune Magazine
Real Estate is one of the fastest growing sectors, boosted by
the country’s high rate of urbanization
Propelled in part by the country’s high rate of
urbanization (3.8% compared to the Africa average of
3.5%), it has grown at a CAGR of 24% over the last thirty
years
It contributed about 9% to GDP in 2015
According to PwC, the real estate market was valued at
₦6.4trillion (US$32 billion) as at 2014, with the Lagos subsegment accounting for at least 40% of the total
Nigeria’s housing deficit is estimated to be over 17
million units (growing at 780,000 units a year).
In 2014, the country spent $36.4 billion on major
infrastructure construction projects, placing Nigeria as
the top spender amongst all West African countries
Real estate capital and financing is slowly taking the
financial centre stage
A major project in Lagos currently is the US$6 billion Eko
Atlantic Beach front city
This sector offers both Investment and Insurance opportunities
17 |
Source: Broll Properties Nigeria Real Estate Report
Nigeria is the most populous country in Africa accounting for
1/6 of the African population
•
•
•
180 million residents representing about 2.46%
20%
Of the four MINT countries (Mexico, Indonesia,
15%
Nigeria, and Turkey), Nigeria is the fastest
10%
growing with the largest population of children
5%
aged 15 years and younger.
0%
97 million people between ages 15 and 65
years
•
Population Growth Rate
of world population
Nigeria Population Growth
Nigeria’s median age – 18 years is one of the
youngest in sub-Saharan Africa
•
50% of Nigerians are urban dwellers
•
Labor
force
is
about
53%
of
the
total
•
17% employed earning >250,000 per annum
•
1.1% earning > 2 million per annum
•
0.35% earning > 10 million per annum
•
About 389 ethnic groups gives the country a
cultural diversity
Nigeria’s life Insurance premium is only 30% of
total industry GPW compared to Ghana’s 47%
18
Source: Worldmeter; CIA World Factbook, World Bank, NIA Digest
Nigeria Age-Sex Distribution, H2 2015
Age
population
•
World Growth Rate
65+ yrs.
-1.5%
1.6%
55-64 yrs.
-1.9%
2.0%
25-54 yrs
-15.7%
15-24 yrs.
0-14 yrs.
-9.9%
14.9%
9.5%
-22.0%
21.0%
-25% -20% -15% -10% -5% 0%
5% 10% 15% 20% 25%
Percent (%)
4
Case Study : Kenya and South Africa
Case Study: Evaluation of insurance sector of economies
without oil & gas
Ranks high in premium growth globally
and is leading in Sub-Saharan Africa
49 insurers, 5 reinsurers,198 brokers and
5,155 agents
Minimum paid-up capital have been set
at about $6mn, $4mn, $10mn and $5mn
for
the
business
general,
long
reinsurance
term,
and
general
long
term
Most
developed
in
the
African region, with one of the highest
premium-to-GDP ratios
GPW of $45.14bn as at 2015
Penetration rate of above 14%
Mostly
dominated
by
life
insurance
accounting for 81% of premium
business reinsurance
About 78 long-term insurers, 87 short-term
GPW of $1.8bn as at end of 2015, with
insurers, 6 reinsurers and 11 captive insurers
general business accounting for 65%
The insurance sector is adequately served
Gross reinsured premium accounts for
by a wide range of intermediaries, with
9.5% of the total industry premiums
approximately
92.9% retention ratio for the life business
10,992
financial
services
providers (FSPs) as at March 31, 2014
while the general business stands at 74.2%
25% of total GPW is from Motor insurance
20 |
Sub-Saharan
Source: Cytonn Investment “Kenyan ‘s Listed Insurance Companies Analysis”, KPMG “Insurance in Africa”, BMI Industry Research
Kenya and South Africa share common drivers responsible for
their developed non-oil dependent insurance industry
1
2
Technology
3
Extensive distribution channel
4
Innovative products
5
Alternative channels of premium
collection
Specialization
6
8
7
High level of trust between customers
and insurer
Risk awareness
10
9
Diversification of investment
21 |
Growth promoting policies from
regulator
Source: AXA Mansard Team Analysis
Advanced insurance model e.g
OUTsurance
5
Challenges of Insurance Penetration in the
Non-Oil Sectors
The underdevelopment of the Nigerian Insurance Industry can
be attributed to a number of negating factors
Out of 57 operators, less than half advertise in
the print media, less than 20 on radio and less
than 10 on TV
LOW AWARENESS
In view of the traditional ideas held
about the practice of insurance, it usually
takes a while for regulatory bodies to
give consent to new concepts.
EVOLVING REGULATORY
FRAMEWORK
LIMITED
DISTRIBUTION
CHANNELS
MANPOWER
UNHEALTHY
COMPETITION
23
Source: AXA Mansard Team Analysis
INDUSTRY
CHALLENGES
The insurance industry needs to
expand its horizon in terms of
distribution. There is a huge gap in
terms of market penetration.
Remuneration in the industry is not
competitive compared with others in the
financial services sector. Training budgets
remains very low.
Lack of innovation among operators leading
to repetition of ideas across the industry and
unhealthy and predatory pricing competition
6
Conclusion
Influencing Government Policies
25 |
Source: AXA Mansard Team Analysis
Agglomerations
Specialization
Distribution
Advance Insurance Models
Consumer Education
Product Innovation
Partnerships &
Collaborations
Non-oil sector premium growth can be driven by implementing key
learnings from other countries that are not dependent on oil & gas
when the music changes
so does the dance
26 |
THANK YOU
August, 2016 / Lagos