Suspension of Insurance Firms – Matters Arising

October 6, 2010


Your news coverage of the suspended insurance companies refer. There should be additional information for the investing public on the recent suspensions, one should expect.


The Management of the Nigerian Stock Exchange had, this morning, placed twelve quoted insurance companies on technical suspension for failure to submit their Audited Accounts for the year ended, December 31, 2009.


The ‘Exchange’ should make further and full disclosure on the conditions of these firms. Why were these companies not suspended alongside other companies in the first wave of suspensions?


Is it possible that some of the affected insurance companies have their accounts before NAICOM, which must approve the accounts before they are sent to The NSE, as with the CBN and the banks?


If this is the case, what is the purpose of punishing these companies (and their shareholders) for the sins of NAICOM? NSE should work with other regulators to streamline compliance issues and its impact on listing requirements and where flagrant abuse is observed, outside regulatory inefficiencies, such companies must be governed accordingly; as a deterrent and investor protection imperative. How long does it take NAICOM to consider and approve an account?


Seriously, is anybody measuring the cost of some of these actions to corporate reputation and goodwill? Of course, it could be argued that the companies made a late submission of their accounts to NAICOM. Was this confirmed? Did The NSE, in the spirit of cooperation under the FSRCC, consult with NAICOM on this matter?


Who are we holding responsible for the apparent failings of these companies in their financial reporting obligations – the board, management or their regulator?


It’s not enough to merely report that companies have been suspended. We should not be selective in our view of corporate governance and pursuit of its ideals. The suspension raises a lot of issues and we should begin to look at the wider issues. 


Has anyone bothered to take a look at the composition of the boards of some of these companies? Should that not by itself be the story? In other climes, some of the contradictions we are seeing in what these persons say and what they do are sufficient basis for them to throw in the towel. Of course, this is Nigeria. Powerful people do not throw in the towel.


Also, what is the purpose of announcing that stocks like MTECH and Nigerian Sewing Machine have been put on “Technical Suspension” when long before now they had been on “Full Suspension” at The NSE? This seems like a bad case of unnecessary sensationalism – when numbers are unduly magnified. Is this sensationalism aimed at “restoring investor confidence” or further damning the market?


I encourage members of the investment community to examine the Insurance Index. What are the constituent stocks of this Index? Which ones grew today as to drive the growth of the index? What is the sum of their “capitalization” relative to the “total capitalisation of the constituent stocks”? 


Just wondering and seeking an answer.


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