ANNUAL REPORT - Cornerstone

CONSOLIDATED RESULTS AT A GLANCEIn Thousands of NairaAs at 31 December20202019Change%Financial PositionCash and cash equivalentsFinancial assetsTrade receivablesOther receivables and prepaymentsReinsurance assetsDeferred acquisition costInvestment in joint ventureDeferred tax assetsInvestment propertyProperty and equipmentIntangible assetsStatutory depositTotal 5Investment contract liabilitiesInsurance contract liabilitiesTrade payablesOther payables and accrualsDeferred commision incomeIncome tax payableDeferred tax liabilitiesEmployee benefit obligationsTotal 60(55)5191(6)629Share capitalShare premiumTreasury sharesAFS Fair value reserveContingency reserveRetained earningsShareholders' fundsNon-controlling interestTotal ,846,07419Total liabilities and equity43,828,21435,153,5298,674,6852520202019 067)(56)(47)Profit or Loss and Other Comprehensive IncomeIn Thousands of NairaFor the year ended 31 DecemberGross premium writtenGross premium incomeNet premium incomeOther incomeTotal incomeClaim expenses (net)Underwriting expensesOther expensesTotal benefits, claims and other expensesProfit/ (Loss) before taxProfit/ (Loss) for the year** Comparative information for the profit or loss and other comprehensive income has been re-presented to separately disclose the profitor loss from discontinued operation.06

CHAIRMAN’SSTATEMENT

CHAIRMAN’S STATEMENTDespite the challengingenvironment, the GrossPremium Written ofCornerstone Insurance andits subsidiaries(“Cornerstone Group” or“the Group”) for the yearunder review was N17.53billion, representing anincrease of 34% over theprevious year.MR. SEGUN ADEBANJIGroup ChairmanDistinguished shareholders, members of the Board ofDirectors, invited guests, ladies and gentlemen. Iwelcome you all to the 29th Annual General Meeting ofour Company, Cornerstone Insurance Plc. (Cornerstone or “theCompany”) and I hereby present to you the Annual Report andAccounts for the financial year ended 31st December 2020 as wellas an overview of the major developments that influenced ouroperations and financial results during the period.Besides the unfortunate human toll of the virus, economic activitywas also greatly affected. The IMF estimates that the globaleconomic contraction was -3.3 percent and could have been threetimes as large were it not for much needed policy support andinterventions by governments in many countries. It is alsoestimated that close to 95 million more people fell below thethreshold of extreme poverty as a result of the pandemic andlowered economic activity. Hardest hit were some of Nigeria’smain trade partners such as Brazil, China, India, U.S. and theEuropean Union, all of whom witnessed multiple waves ofinfections and hospitalizations.The Global EconomyThe ramifications of the novel Coronavirus (COVID-19) pandemicand ensuing governmental responses were felt across the globe. Inan unprecedented year, most countries across the worldimplemented partial or full lockdown measures and movementrestrictions in a bid to limit the spread of the virus.Despite ominous predictions based on weak overall healthcareinfrastructure, the African populace was largely spared the fullbrunt of the effects of the virus. The continent did however see a08

CHAIRMAN’S STATEMENTcontraction in GDP of -2.1 percent as economies heavilydependent on tourism (Egypt, Morocco) and crude oil exports(Nigeria, Angola) faced foreign exchange shortfalls.Macroeconomic ReviewCrude oil prices, which were as high as US 66 per barrel at thestart of the year, plunged to less than US 20 per barrel by thestart of the second quarter on the back of reduced globaleconomic activity. The economic outlook was dire to the pointthat the oil and gas industry witnessed a historic fall ofbenchmark oil futures into negative territory.Gross Domestic Product (GDP) statistics released by the NigeriaBureau of Statistics (NBS) indicated that the Nigerian economygrew by 1.87 percent in Q1 2020 but witnessed two consecutivequarterly contractions of -6.10 percent and -3.62 percent in Q2and Q3 2020 respectively. The economy ended the year with aslight growth of 0.11 percent in Q4 2020. For the full year, theannual growth of real GDP declined from 2.27 percent recorded inthe previous year to –1.92 percent.As a result of dwindling foreign exchange revenue, externalreserves trended downwards for most of the year; the sharpestdrop again coinciding with the start of pandemic lockdowns andrestrictions in April. The Nation’s external reserves position stoodat US 38.53 billion at the start of the year and US 35.37 as atDecember. The decline can also be attributed to the interventionsby the Central Bank of Nigeria (CBN) in the forex market in a bid tostabilize the Naira/US Dollar exchange rate.The apex bank restricted local investors from purchasing OpenMarket Operation Bills and also implemented a policy to shore upforeign portfolio inflows. As a result, Treasury Bill rates droppedsharply during the year. At the last Nigerian Treasury Bill auctionof the year, the 91-day bill and 364-day bill sold at 0.35% and1.21% respectively; these were some of the lowest rates in thehistory of the auction. During the year, the Monetary PolicyCommittee of the CBN also adjusted the Monetary Policy Ratedownward in Q2 and Q3 amid economic disruptions caused bythe pandemic.Examining other trends in the economy, headline inflation,measured by the Consumer Price Index (CPI), trended upwards allthrough the year from 12.13% in January to 15.75% in December.The rise was largely due to continued clashes between farmersand cattle herdsmen which ultimately drove food inflation from14.85% in January to 19.56% at the end of the year.The Insurance IndustryThe impact of the economic situation and the pandemic on theindustry was multifaceted. As the revenues and disposable incomes ofcorporate and individual customers alike were affected, so too wereinsurers’ premiums. While some corporates rationalized theirinsurance cost alongside other expenses, some others cut outinsurance altogether from their budgets.Stagflationary forces being exerted on the economy meant that costof claim settlement rose as the year progressed and cost ofreplacement parts skyrocketed. This was especially the case forinsurance policies that were priced and written at the start of the yearbefore the downturn in the second quarter.The industry played its part in supporting the courageous healthworkers and frontline medical staff who were at greatest risk ofcontracting the virus while performing their duties. 16 insurancecompanies, including Cornerstone, through the Covid InterventionScheme, provided medical and life insurance to ensure that healthcareproviders had much needed peace of mind while carrying out theirduties.In the fourth quarter of the year, the country was faced with anotherunprecedented situation. The civil commotion and ensuing propertydamage and looting that stemmed out of protests against policebrutality had a heavy toll on the insurance industry. It is estimatedthat about 2,000 insured businesses were affected by the violence insome ways. The industry as a whole has settled N4 billion claims outof N4.5 billion in respect of the #EndSARS protests.Company Financial PerformanceThe global and domestic economic events of the year had significantrepercussions for the financial services sub sector in Nigeria. The Boardand Management of your Company however acted proactively tominimize the effects on our financial performance. Our financialperformance can also be attributed to our focus on strengthening ourenterprise risk management framework over the past few years.Despite the challenging environment, the Gross Premium Written ofCornerstone Insurance and its subsidiaries (“Cornerstone Group” or“the Group”) for the year under review was N17.53 billion,representing an increase of 34% over the previous year.Premiums from life insurance grew from N3.84 billion in the previousyear to N5.54 billion in 2020 and accounted for 31% of GrossPremium Written. The largest contributors to General Business GrossPremium Written were (i) Oil, Gas & Aviation, (ii) Engineering & (iii)09

CHAIRMAN’S STATEMENTPersonnel and other operating costs dropped by close to 7% asManagement executed remote working protocols and other measuresto safeguard the welfare of staff. Our investment in a robustnationwide technology infrastructure over the years ensured thatnormal operations were carried out unabated. Consequently, ourGroup ended the year with a profit before tax of N1.76 billion.Motor classes, contributing N3.53 billion, N2.86 billion and N1.52billion respectively.Our investment portfolios also yielded positive performancefigures, driven mainly by the effect of changes in foreign exchangerates and also from sales of foreign currency denominated assetsduring the year. Investment and Treasury activities contributedN3.73 billion to overall revenue.The gross claims ratio for the year stood at 41% and has beenrelatively stable year on year since the Company put in placestricter risk acceptance parameters. Even though the overall ratioof claims to revenue has remained relatively stable, the effects ofthe Q4 2020 protests are clearly noticeable in our financialstatements, as non-life gross claims incurred increased by 62%when compared with the previous year and gross claims from thefire class specifically rose by 85%, from N816 million in 2019 toN1.51 billion.Personnel and other operating costs dropped by close to 7% asManagement executed remote working protocols and othermeasures to safeguard the welfare of staff. Our investment in arobust nationwide technology infrastructure over the yearsensured that normal operations were carried out unabated.Consequently, our Group ended the year with a profit before taxof N1.76 billion.OutlookAs I bring my presentation to a close, on behalf of the Board ofDirectors, Management and Staff of Cornerstone plc, I want toextent our thanks and appreciation to the healthcare and frontlineworkers of Nigeria who were steadfast in the execution of theirduties and who sacrificed their time with their own families so thatour nation may be saved from a deeper crisis. We also remember thoseindividuals and their families who have been tragically affected by theoutbreak. Also join me in appreciating the staff of our Company thatworked tirelessly through the year to ensure that we made goodprogress in spite of extraordinary odds.Many organizations and individuals have been deeply affected by boththe health and economic trials the year in review posed. We mayhowever be able to point to a silver lining, which is that the profile ofinsurance was elevated. Through the year, more Nigerians madeenquiries about their insurance coverage and options than in anyother period in the recent past.While 2021 may not be a year for expansion, it is a year in which we arediscovering new strengths and capabilities as the world embraces newways of working and communicating through technology. Your Boardtherefore anticipates new opportunities for the insurance industryand for Cornerstone as we venture into this new normal.I would also like to thank you, our esteemed shareholders, for yoursupport and sustained interest in the growth of our Company,Cornerstone Insurance Plc.Thank you.SEGUN ADEBANJIChairman, Cornerstone Insurance PLC10

BOARD OF DIRECTORSSEGUN ADEBANJIGANIYU MUSASTEVE IWENJORAChairmanGroup Managing Director/CEONon – Executive DirectorMR. SEGUN ADEBANJI, has over 35years working experience in blue ch ipcompanies. Prior to joining African CapitalAlliance in January 2011, he was the ExecutiveVice Chairman of Alvac Company Limited. Heis a Fellow of both the Chartered Associationof Certified Accountants and the Institute ofChartered Accountants of Nigeria.MR. GANIYU MUSA is a h ig hly experiencedmanagement professional with over 35 years of diversifiedexperience in insurance, reinsurance, audit, consulting,business advisory and financial management. Hisprofessional experience started with Pannell Kerr Forsterand later Arthur Andersen & Co where he trained andqualified as a Chartered Accountant and gained top qualityexperience in audit and financial consulting.MR. STEVE IWENJORA has over 17years cognate experience in the financialservices sector, spanning banking, privateequity and investment management withlocal and international organisations. He ispresently the Managing Director of CAN FundManager Limited, a Company under AfricanCapital Alliance (ACA). He worked with CitiBank and Continental Trust Bank beforejoining ACA in 2004. He is a Fellow of theInstitute of Chartered Accountants of Nigeriaand holds a Bachelors Degree in Accountingfrom the University of Lagos.Mr. Adebanji's working experience includesUAC and Unilever PLC London and SouthAfrica. He has served as Financial Director ofNigerian Breweries PLC and later ManagingDirector, Heineken Ghana Breweries andNamibia Breweries. He is a Non-ExecutiveDirector of Nigerian Breweries Plc andChairman, Bevpak Nigeria Limited.*Mr. Segun Adebanji was appointed asChairman of the Board effective 28th April,2017.He subsequently worked at African ReinsuranceCorporation for 19 years, holding key positions, includingDirector of Finance & Accounts/Chief Financial Officer andDeputy Managing Director. He played a lead role in thecreation and initial supervision of the risk managementfunction at African Reinsurance Corporation andsupervised the design of the Corporation's investmentguidelines and asset allocation. He was also instrumentalin the preparatory work and the eventual setting up of thecorporation's subsidiary in South Africa, where hesubsequently served on the Board and Audit Committee aswell as the Retakaful subsidiary in Cairo, Egypt.He left Africa Re in 2011 to join African Capital Alliance(ACA), a leading Pan-African private equity firm asInsurance Sector Specialist and a Director on the Board ofCornerstone Insurance Plc. He joined CornerstoneInsurance Plc in 2012 as the Group Managing Director/CEOand he is the current Chairman of the Nigerian InsurersAssociation having also served as Deputy Chairman andTreasurer. In addition to Cornerstone Insurance Plc, Mr.Musa currently serves on the Board of a Pension FundAdministration company and an Oil & Gas Exploration andProducing Company. He is also the current Chairman ofCouncil of Bureaux, ECOWAS Brown Card.Ganiyu holds a Bachelor of Science (B.Sc. Hons.) degree inBusiness Administration and a Master in Banking andFinance (MBF) degree, both from the University of Lagos.He is a Fellow of the Institute of Chartered Accountants ofNigeria (FCA), having won multiple National merit awardsin the qualifying professional examinations. He is also aSenior Member of the Chartered Insurance Institute ofNigeria and has achieved several professional courses inFinance, Insurance and Corporate Governance at home andabroad11

BOARD OF DIRECTORSEKWUNIFE OKOLIELIZABETH AMADIUMEANTHONY EGBUNAIndependent Non-ExecutiveDirectorIndependent Non-ExecutiveDirectorMR. ANTHONY EGBUNA served as aVice President and Investment Officer atAfrican Capital Alliance. Mr. Egbuna joinedAfrican Capital Alliance in 2009. He worked atArthur Andersen, FSB International Bank,ProAce Consulting, and United Bank forAfrica, as well as in Reynolds American,Winston Salem, and Jefferson Wells. He wasone of a two-man team that led theturnaround consulting engagement at thethen Federal Savings Bank.MR. EKWUNIFE OKOLI has over 30years consumer goods industry experience ina wide cross section of over 20 Africancountries including Nigeria, Ghana,Cameroun, Eth io pia, Angola andMozambique among others.MS. ELIZABETH AMADIUME hasover 32 years working experience in allaspects of non-life insurance operations. Sheis a member of the Board of Directors of theAfrican Reinsurance Corporation (SouthAfrica) Limited. She has also served as theDirector, Central Operations and SpecialRisks of African Reinsurance Corporation andits Regional Director of Mauritius.Non-Executive DirectorHe has more than 28 years of variedexperience in financial management,banking, auditing, process improvement,s trategic planning and enterprise riskmanagement, having been exposed tofinancial services, oil and gas, manufacturing,consumer products and several otherindustries as auditor, consultant, and banker.He serves as Non-Executive Director ateTranzact International PLC.Mr. Egbuna is a Chartered Accountant andholds an M.B.A. degree from Wake ForestUniversity, Winston Salem and holds a firstclass Bachelor of Science degree in SocialSciences from the University of Ife.Mr. Okoli worked with Diageo for many yearsand served in different capacities including asManaging Director, Guinness Ghana,Managing Director, Guinness Cameroun,Marketing Director, Guinness Nigeria PLC andGuinness Brand Director, Africa with the last10 years as CEO of large consumer goodsmarkets and the last 4 years as a RegionalManaging Director and acquired strongFMCG commercial and Brand Marketingexperience at Diageo.He possesses significant corporategovernance experience especially in difficultgeographies and has held executive and nonexecutive board positions in various Diageosubsidiaries including Guinness Nigeria PLC,Guinness Ghana and Seychelles BreweriesLimited. He is very passionate about Africaand its potential business and socialopportunities and is currently the founder ofAdvantage Consult Limited.12Ms. Amadiume was Presid ent of theInsurance Institute of Mauritius from April2006 to March 2009, and was a Member ofthe Mauritius Financial Services ConsultativeCouncil Technical Committee for Insurancefrom 2007 to 2008; a Member of the GeneralInsurance Technical Committee, Kenya 2004;Member of the Joint Insurance Industry RiskEvaluation Committee, Kenya 2004; andVisiting Lecturer, College of Insurance Kenyafor several years, up to 2004.Ms. Amadiume is a Fellow of the CharteredInsurance Institute, UK and has a Master’sDegree in French Language and Literaturefrom the Voronezh State University, thenU

Company Secretary PAC Solicitors 16, Kofo Abayomi Street Victoria Island Lagos Registered Office Cornerstone Insurance Plc 136, Lewis Street Lagos Tel: 01-2806500 Website: www.cornerstone.com.ng Corporate Head Office Cornerstone Insurance Plc 21, Water Corporation Drive Victoria Island Lagos Tel: 01-2806500 Website: www.cornerstone.com.ng