By NBF News

Having put in 34 years of his working life in the insurance industry, former Managing Director of UnityKapital Assurance Plc, Alhaji Mohammed Kari, (former managing director of NICON Insurance and Nigerian Reinsurance Corporation), in this interview with Favour Nnabugwu and Regina Otokpa explains his reason for bowing out at UnityKapital, the failing industry market agreement and why the company he manned for four years should withdraw from insurance industry agreement.

What is your take on NAICOM's corrective measures?

All financial regulators have because of the financial meltdown and experiences of allied economies in the world have become proactive to issues as against the former approach. NAICOM being one of them had come up in advance with measures to check potential problems.

Though not as active as others have said, when compared to say the Central Bank of Nigeria, but the problems the Central Bank of Nigeria is handling are totally different from those of the insurance industry and the banking sector has been seen to be like an elder brother of the insurance industry. So the measures that have been so far taken by the CBN have got more publicity than that of NAICOM.

That's understandable because the banks are bigger operators but the regulators, NAICOM has been quietly, in my opinion, extending far reaching regulatory controls and in the interest of the industry also, operators of the industry will think that NAICOM is being too excessive, too interlocking, that is what a regulator is supposed to do. A regulator is not supposed to please the underwriters or the operators but to protect the consumer and protect the law of the land.

I even wish that our regulator has more regulatory powers. Most of the regulations as contained in the Insurance Act of 2003 are so restricted in my opinion. The regulator has to go and seek approval for almost every action, it takes whereas the CBN act has empowered it to initiate regulations without recourse to the ministry or to the legislative body. I wish NAICOM could have such powers to be able to exercise more regulatory control than it has now.

How far have you gone with the proposed withdrawal from industry market agreement? We did not offer to withdraw from the Nigerian Insurers Association (NIA) but from the market agreement signed by NIA. We were one of those that advocated for the market agreement and the market agreement was supposed to be sovereign unity instruments that will enable us check ourselves, check the excesses of each operator and we signed that agreement voluntarily for that matter.

All chief executives and their companies' secretaries signed, binding their companies to be of good behaviour, to do what is legal and what is ethical and professional. One year down the line, we realised that the defaults is more than respect for the agreement and we felt constrained to be part of an agreement that is not being implemented and restriction to freedom to do what is professional. What is professional in this case is not to be reckless and to ensure that we continue to be professional in every aspect of our operation so we told the NIA in November 2010 that we were withdrawing by 1st of January 2011 from the market agreement but we continued to be members of the NIA and when we went for the market agreement, we meant that the NIA cannot under the collective agreement invite us to answer for any of our actions neither would we subject ourselves to NIA investigation under the market agreement terms.

The NIA rules and regulation they are as good as the market agreement but somehow the NIA has failed to implement them and to enforce them on members. Members have continued to do reckless things they have been doing so we wondered why we entered the agreement in the first place and we believe it is an issue of professionals being bounded by their words and not necessarily by signatures but beyond our words went ahead and signed the document but everybody disregarded it. So, we have withdrawn effective from 1st January but that notwithstanding, we do not charge ridiculous rates. We still charge rates, which we believe, are commercial, economic and professional. But we will not be subjected to the rules of the market agreement which means NIA cannot come and investigate us or will not demand from us to explain things we have done which might have contravened the agreement.

What is the compliance level of the agreement?
Since the agreement started in 2010, some companies have been reported for breaching the terms of the agreement. Companies have been investigated and have come to face the disciplinary committee but we as a company are not impressed by the punishment meted out on them. A rule set by any law is not supposed to punish somebody who has offended. In my opinion it's suppose to deter you from taking or doing an offence. So once you commit an offence you are not being punished, you willingly decided to commit the offence knowing that there is deterrence. So if you are not deterred, you shouldn't blame anybody for witch-haunting you.

It is a typical approach in Nigeria to give extraneous reasons for things we have done willingly. Some of our colleagues who have been reported for breaching the terms of agreement claimed to be witch hunted because they are leaders or others are jealous of them or because it is a competitive jealousy. We don't think it was that because you have known the areas you are limited to before you breach them, you should have yourself to blame. So we are not respecting the agreement as a market and we thought we shouldn't speak with one side of our mouth and do something with the other, we just thought we should be plain and clear. We are not in an agreement but we are still professionals and anybody who wishes to go and deceive stakeholders that they are bound by when they don't respect it, is up to them.

As you march forward what is your legacy for the upcoming generation?

I became a chief executive in an insurance company way back in 1992, and I don't think there's anybody in the market today who was an MD in 1992 still as an MD.

I left the industry in the year 2000, even in the year 2000 they have been just a few of them. Now, when I got back into the market in 2007,I found as Managing Director, colleagues of mine who were not involved in the top level of management in mass comparism at that time. Majority had also been from the new bridge companies with new ideas which was an interesting challenge for me to fit in to this new cadre

Thank God the profession is a continuous exercise, very little has changed in approaches and in methods so fitting in was not a problem especially fitting in with principles that I believe are timeless which is whatever I have done in life I've always tried to do the right way because they are only two ways; the right way and the wrong way and I've always as a professional, believed doing it the right way is the right thing to do. We have seen that in the banking sector where banks claimed to be number one bank, number two, all the banks, big bankers of those days were challenged seriously when the ways and methods changed.

If they have not so drastically changed in the insurance industry, I believe it is a matter of time, they will change and once such a change comes into the industry, only the company doing the right thing will survive. So I've maintained my posture as far as doing things the right way and professional way are concerned. That is what has brought this company to this level so far.

The measure of whether I have succeeded or not will only be adjudged by posterity that hopefully in the future an assessment of the company can give the right result. I have always preached the same principles with all my colleagues in every company I've worked, to do things the right way and time would take care of the rest. It will be hard, it will be difficult, yes but not impossible. As an insurance company you will likely have a small premium income yes, rising costs are there; you can't have control of everything but whatever you have under your control, control it.

And the internal factors?
What are the internal factors_ internal factors you can't control them. If you try to change them and you cannot, you don't have to join them if they are wrong and that I have preached all through my carrier and with all my stay with UnityKapital Assurance. You can ask any of my colleagues in this company and they will tell you that I have always preached and also do that I know that some of my colleagues because some cannot understand why we should be behaving differently from other companies. The other companies are returning N4billion to N5billion premium income and we are returning only N1billion. I have always told them that N1billion is hard earned premium.The N4billion to N5billion other companies are reflecting are usually premiums that may not be collected or, generated premiums to impress some shareholders or some directors which we don't do and as God will have it, the regulator was extremely tough last year on accounts as you know, up till today there are some companies that have not gotten their account approved and from what we have all agreed as an industry, these things are going to be tougher this year.

Are companies writing back accumulated premiums?
More companies will have to write back accumulated premium income over the years. Because some of them have been boosting the assets of their companies with outstanding premiums that are not collectable. When they start reversing those provisions, UnityKapital will be smiling to the bank because it will not affect us drastically.

The underwriting profit reported in the last account of 2009, unfortunately cannot be compared with 2010 because the auditors are already in working on our 2010 account and we are hoping that they will conclude their assignment by March and we will be one of the first companies to have an AGM this year everything being equal because we have advised the auditors and they have been working since the 2nd week of January and it is my belief that in the next two weeks, some draft account will be ready for the consideration of the directors after which an AGM will be fixed as soon as that is received and until that is received, I will not like to preempt the auditors as to what they will find in the books.

We announced and got approval for two major policies as far as our capital base is concerned. One of them was the distribution of bonus shares. We distributed 650 million shares to our shareholders in the ratio of one share for every 19 held which was concluded by 2nd of November 2010 and the 2nd aspect was share buyback. We applied to the Security and Exchange Commission being a quoted company and they requested us to submit an up dated account after September because the processes was ongoing until the end of September and they have not finished. So we invited an auditor to work on an interim account, which is not a regulatory requirement, which was then submitted to SEC, and SEC came up with new rules, which we felt was shifting the goalpost.

Getting approval for share buyback?
They did not tell us that new regulation were released since our application and in the new regulation, there were two major aspects which we needed to clarify before we can get the approval to do the buy back and one of them was share buyback henceforth they said, can only be entertained through accumulated profit not share premium account and we wanted to do it through share premium account. Secondly, they confirmed to us that the share buyback must be done within 12 months of the approval for the buy back by the shareholders not from the day it started. If you remember we did our AGM in august, it means that if we commence now we have until August to complete the exercise.

when we thought we should have 12 months from the day we start.

So that is a little bit restrictive and once you start share buy back and complete, you cannot do another one for 365 days. So the company is in the point of first of all addressing the first issue and then if we got our clearance, then considering whether we should commence one until august or wait until the next AGM and get a fresh approval with a fresh buyback mandate to enable us because 15 percent is what we are buying back and we have enough liquidity to be able to attend to all but back.

We have our share premium and that one cover the 15 percent of the share capital and we have excess liquidity to the tune of almost N5.6 billion that we believe many companies today cannot claim to have. So these are the issues awaiting the conclusion of the buyback.

Why did you avoid investing in the capital market during your stay as the MD unity capital insurance?

Well we have an internal insurance investment department with a very robust investment policy.