The management of A & G Insurance has reacted to the suspension order slammed on the firm by the insurance regulatory body, the National Insurance Commission (NAICOM).
A&G Insurance was among the insurance companies that were banned from transacting insurance business for the next six months.
Other firms affected in the suspension order announced by NAICOM last Monday, August 6, 2012, were Alliance & General Life Assurance Plc and Fidelity Bond Insurance Brokers.
A&G Insurance Plc is denying the various allegations of any wrong doings leading to the unfortunate suspension of its operating license by the regulatory body.
In a swift reaction, the Divisional Director, Corporate Planning and Strategy, A & G, Mr. Dotun Onipede, said that the company’s operations are fully in line with good corporate governance and the interest of its clients and shareholders.
Onipede said, “the company is still wondering how the allegation of insolvency came up given that it had paid out more than N20 million for claims in the last two weeks e.g. CBN Dana Air Crash Victims Group Accident Claim and over N1.20 billion to Nigerian College of Aviation Technology, Zaria and others.”
Onipede, added that the Financial Reporting Council (FRC) was not thorough enough in recommending to NAICOM to suspend the management team of Alliance & General Insurance Limited and Alliance & General Life Assurance Plc from operation and slamming of N100 million penalty, because they no longer exist and the account in question had been withdrawn by the board.
Onipede, claimed that the said two companies do not exist as at the time NAICOM announced the suspension. “Following satisfactory due diligence, both of them were NAICOM approved for merger into one strong entity. NAICOM duly approved the merger under the new name Alliance & General Insurance Plc. It therefore implies that NAICOM suspended two companies that no longer exist”, he noted.
He said: “But since the suspended companies were the product of the current company, we are inclined to react in the interest of our shareholders, clients and other stakeholders”.
The Divisional Director, Corporate Planning and Strategy, also noted that unless there is a deliberate intent to bring down Alliance & General Insurance Plc, FRC and NAICOM, should not have hastily taken a decision against it based on issues against the two former companies whose merger was well approved by NAICOM and other relevant authorities.
“The company cannot be said to be insolvent because the merger was with intent to strengthen the entity financially and managerially and technically. So, is NAICOM saying that the company that emerged from it is suddenly insolvent after a month? Moreover the solvency margin of Alliance & General Insurance Company Ltd for 2010 Alliance & General Life Assurance Plc for 2009 and which stood at N6, 317, 314,326 and N8, 068,614,944 respectively and was fully approved by NAICOM in 2010. It follows then, that NAICOM’s scrutiny capability is in question. In fact, we paid more than N1.2 billion as claims within the last few months, which is not the mark of an insolvent company”, he said.
He added, “If FRC is not satisfied with our financial report as they claimed, they should point out the areas of inconsistency rather than making sweeping comments just to ensure our crucifixion. The 2010 financial report that we submitted followed the pattern of 2009 financial report, yet NAICOM approved that of 2009 accounts in 28 Feb, 2011.
This raises some puzzles because this is unusual. How are we sure that this not a ploy to take over the company as has been done in the past by some overzealous officials? If NAICOM has an issue with us, appropriate processes and procedures should have been taken to compel us to make amends, but nothing like that happened.”
The Divisional Director, Corporate Planning and Strategy, Mr. Dotun Onipede therefore urged NAICOM to rethink its decision in the interest of justice and fairness and in the spirit of democracy and good governance which it subscribes to, not forgetting our valued clients, the insuring public and the Insurance Industry as a whole.
He added that the company had always employed the best ethical practices as stipulated by NAICOM in carrying out its business, hence it expected NAICOM to duly communicate to it all the alleged violations listed by FRC for it to adequately defend itself before the announcement of the suspension order.
“Our records show that we were not given fair hearing in all of this. As it is, we suspect, a grand ploy to discredit the company and hijack the management as has now been done using guerilla tactics,” he noted.
He however said that the action and inaction of NAICOM are clear evidence of malicious intent and conspiracy to damage the good reputation of the company.
Responding to the defence put forward by A & G Insurance, NAICOM, through its Head, Corporate Communications, Mr. Lucky Fiakpa, in a statement re-echoed the reasons for the suspension order on A&G Insurance, stating that the companies were suspended based on, but not, limited to the reasons of infractions in the case of A&G Life which include, Late or non-rendition of annual returns and audited financial statements contrary to Section 26 of the Insurance Act 2003; shortfall in minimum capital base contrary to S.9 of the Insurance Act; deficit in policyholders’ protection assets contrary to Section 25 of the Insurance Act; non-disclosure of significant transactions that could materially affect the true and fair view of the 2010 financial statements and; misrepresentation of audited financial statements of the company for the year ended 31st December 2010.
Similarly, the statement also gave clear reason for the suspension of Alliance & General Insurance Company Ltd, which the infractions included: late or non-rendition of annual returns and audited financial statements contrary to Section 26 of the Insurance Act 2003; non-disclosure of significant transactions that could materially affect the true and fair view of the 2010 financial statements thus making it difficult to determine the solvency status of the company and; Misrepresentation of audited financial statements of the company for the year ended 31st December 2010.
The commission said that even the issues raised in their statement to the press cannot add up, adding that they claimed that they pay some money out recently as claims and wonder, “how the allegation of solvency came up”.
NAICOM in the state ment said that there is a difference between solvency and liquidity.
“A company can be technically insolvent and yet liquid. Solvency is prescribed by law and it is usually tied a minimum amount; in this case N3 billion or 15 per cent of net premium (whichever is greater) for non-life business. Anything short of this amount would make the company technically insolvent. Solvency looks at the totality of the company’s liabilities to the policyholders compared with available admissible assets to meet same. So it is not just a one shot payment of claim as is the case here”, NAICOM said.
The commission also noted that there was no basis for other issue raised by the insurance firm that it sanctioned two companies since they have merged into one entity following approval given to them by NAICOM.
“The merger they are relying on is a post-2010 event. The issues in contention are on the 2010 financial statements of the companies. So their defence does not add up at all. Meanwhile as at 2010, no merger had been consummated. Even now, only approval-in-principle was granted by the Commission as no final approval has been granted”, it added.
The regulatory body also noted another issue raised by A&G insurance about “the account in question had been withdrawn by the board”.
The commission’s statement said that the company did not revealed what led to the withdrawal of the said accounts.
“The fact was that the companies submitted two different sets of audited financial statements for each company for the year ended 31st December, 2010 and could not provide satisfactory explanations/justifications for this action, which clearly shows irregularities in the companies’ financial reporting format.
Apart from that, the companies could not provide relevant support to validate most figures reported in these financial statements. Non-disclosure of liabilities of N507million due to Corporate Affairs Commission in respect of its staff retirement benefits scheme and the pending legal action on the Company; Non-disclosure in 2010 audited accounts, the company’s tax liabilities as well as liabilities on Bank loan/Overdraft facilities taken over by AMCON; Clearly the companies had issues with AMCOM, FIRS, CAC, FRC to attend to”.
“Rather than deal with the issues raised in the accounts by NAICOM, the companies decided to cancel them forthwith and commissioned a new Auditor to prepare a set of fresh audited accounts for 2010. They also applied to NAICOM to withdraw the 2010 audited accounts and the restated version earlier submitted to the Regulator. Does this not speak volumes of the way the companies are run?”
It added that they also applied to NAICOM to withdraw the 2010 audited accounts and the restated version earlier submitted to the Regulator, that their claim that they were “not given fair hearing” in all that transpired was falsehood in bold print.
The commission further said that "In view of the regulatory infractions and on the suspicion of various financial reporting and corporate governance abuses by these companies and their auditors, adding that the Commission decided to enlist the collaboration of the Financial reporting Council (FRC) in dealing with this matter.
It said, “We also required the Auditors to confirm that the different sets of accounts issued for the same companies and for the same period were actually audited and certified by their firm. Consequently, the FRC convened several meeting with A & G Insurance Team and NAICOM in attendance.
In the course of these meetings, additional information/facts and issues emerged in respect of the 2010 financial statements, which included: non-disclosure of significant transactions that could materially affect the true and fair view of the 2010 financial statements of the companies; resolutions passed by the Board of the companies and communicated to both NAICOM and FRC that “since NAICOM has refused to approve their restated accounts, they have cancelled the two accounts (the restated and original) and asked the new Auditors- Baker Tilly Nigeria to prepare fresh accounts for 2010”;
NAICOM said that confirmation from AMCON that: "Fidelity Bond Group (which is the parent company of A & G Insurance) equally has outstanding liabilities for bank loans/overdraft facilities and these accounts have been taken over by AMCON; conflicting identity of the Chairmen of Board of Directors of A & G Life and General Insurance Companies.
It noted that at the closing meeting between the FRC and the companies were held on July 31, 2012 Lagos, with representatives of their external Auditors (both disengaged and new), AMCON, ICAN and NAICOM in attendance.
"At the end of the FRC investigation the following conclusions were reached: that the non-consolidation of subsidiaries, the several accounting abuses noted in the 2010 financial statements, the tax issues (non-payments and disclosures) dating from 2007 and the Companies Liabilities now unnecessarily held by AMCON are strong enough to mislead a significant stakeholder. The corporate governance of the companies are unclear and very worrisome and the Policyholders are exposed to untold risks due to the inadequacy of the assets cover and poor solvency margin/capital base of the companies,” the statement said.
The approach to changing external Auditors and the confusing assignment given to them are questionable, adding that NAICOM was requested to suspend the management of the companies and appoint interim managements which shall recommend firm of external Auditors to NAICOM to carry out sustentative audit of the companies.
The statement noted that the companies were penalized with the sum of N50million each for non-compliance with the Statement of Accounting Standards, besides regulatory accounting and corporate governance abuses, adding that the penalties are to be paid within the next seven working days.