Rwanda’s fledgling insurance industry has witnessed some restructuring since 2007, when government brought in new investors into the company as part of the country’s privatisation strategy.
According to Macdonald James Obi, Sonarwa’s Acting Managing Director, before new investors came in, the company was was almost running aground.
“The financial state of the company was not too rosy. The investors embarked on a new rescue strategy. While the house cleansing exercise proved quite challenging, I am happy to say that we have since come out stronger and healthier,” he added.
Since then the company went through several audits, including related restructuring that helped to establish a clearer picture of the firm’s financial state, according to management.
The degree of the restructuring is evident since an audit exercise that normally lasts not more three months, took more than six months to complete. That is how the company managed to extract its 2009 final accounts.
“BNR wanted results and that is how it should be. There was pressure for Sonarwa to adhere to regulatory requirements,” Obi said.
Not only was Sonarwa accorded a new lease of life but the effect of a turn around programme brought in significant effects to the entire insurance sector.
Prior to the entry of Nigeria’s Industrial and General Insurance Plc (IGI), the majority shareholders in Sonarwa, the company was owned by government of Rwanda and some private companies.
“In realisation of a need to reposition to be a more profitable and competitive insurance company in Rwanda, Sonarwa initiated moves to source for a strategic partner that led to the selection of IGI Plc to bring its wealth of technical expertise and the financial capacity to increase shareholder value,” the company said in a statement.
IGI has since its entry increased its equity stake in Sonarwa to 64.25 per cent in a move that has granted the firm immediate access to IGI’s subsidiaries and associated network of companies, thus providing the inputs needed for its turn around.
Addressing the key issues
Some of the key issues IGI had to sort out included attacking weak management composition that bred dismal regulatory compliance culture that in turn bred to dismal performances over the years.
The turn around is currently yielding desired results. The company is now firmly back to profitability through transparent results and compliance to regulatory requirements.
Rwanda’s insurance industry has five main players. And with an estimated 60 per cent market share, Sonarwa says its repositioning is bound to have ripple effects on the entire industry.
Such a lead has brought about an increase in quality of security in the industry that has boosted the fortunes of this trade.
“Financial capacity has been an issue in the industry. Most competitors do not have such capacity. This can be seen when one compares what we have and what the next competitor has,” Obi reveals, adding that the regulator needs to ensure that individual players make more investments in human resource capacity while coming up with additional service provisions to enable players to raise their standards.
“No insurance company operates in isolation. Insurance is about buying capacity to be covered. Insurance companies in turn buy capacity through re-insurance...the regulator needs to think about setting up a reinsurance company.”
Such capacity brought about by foreign companies should be handled locally.
Reporting improved performances
Sonarwa’s total assets grew from Rwf21b in 2008 to Rwf25b by 2010 while shareholder funds stands at Rwf8b up from Rwf6b under the period of review. Gross Premium Income shot to Rwf10b from Rwf6b.
The actuarial valuation report by Alexander Forbes shows that Sonarwa recorded a solvency margin of Rwf544m in 2010. The figure shot up to Rwf2.6b by third quarter of 2011.
Sonarwa’s better capital position brings to question the fate of the 23 per cent shareholding by government specifically whether government is keen on offloading its stakes to the general public through the Rwanda Stock Exchange or whether IGI will be allowed to snap up the government stakes.
Due to the turn around, Sonarwa is very likely to announce an advisory for payment of dividends in future. If that comes to pass, then such a prospect will have signalled the success of the turn around, thus opening a new chapter in the company.