Universal Insurance’s viewpoint is that life insurance should act as a driver for swift economic development in Nigeria, as it does in the wider world.

After his successful takeover of African Alliance Insurance Plc, Cyril Ajagu can finally sit back and relax. The portfolio of the company chairman (he is also vice chairman of Universal Insurance Plc) now includes the oldest and largest life-insurance firm in West Africa. In 47 years, African Alliance has provided coverage for millions of Nigerians – with 140 million inhabitants, Africa’s most populous country. His goal is to take the insurance sector to the next level.

“It’s part of our overarching strategy to transform the insurance sector in Nigeria and bring it up to international standards. We initially acquired 50 percent of African Alliance and it took our board a whole year to decide to take on the remaining 50 percent at a cost of over $60 million. We’re almost there,” says Ajagu. Universal Insurance is backed by its diversified portfolio of investments, as well as a capitalization of 5 billion naira ($42.3 million).

Insurance is an under-developed sector of the economy, in contrast to the needs of Nigeria’s growing middle class. According to the IMF, GDP will grow by 9 percent in 2008, with consumer index prices below 8.5 percent this year and in 2009. The current oil boom is a market signal for insurance firms to deepen their role in the economy. They are also aided by IMF-backed structural reforms.

Universal Insurance Plc wants to see globalization deepen the insurance sector and thus create value. The argument is that Nigeria sells its crude oil to customers worldwide. If it does so, it should also replicate global market trends that will diversify the economic base. If life insurance is seen as a driver for fast-paced economic development in the developed world, why should Nigeria be an exception?

Alphonse Okpor Managing Director of African Alliance Insurance	Cyril Ajagu Chairman of African Alliance Insurance

In an address to brokers and shareholders at Universal Insurance’s headquarters in Lagos last April, Ajagu pledged to infuse new life into the insurance sector. Every Nigerian should be encouraged to buy life insurance policies that generate long-term funds. It is not only about transactions; rather it is about tangible satisfaction and future assets. Life insurance is not only about taking out policies that can benefit families on the death of a client. It can be a pragmatic solution for educational goals, home ownership, retirement benefits and effective financial planning.

The acquisition of African Alliance is Ajagu’s fourth corporate venture into the insurance market. The other three companies already under Universal Insurance management are African Safety, United Trust and Oriental Insurance. According to Ajagu, all outstanding claims of insurers acquired earlier have been paid off after consummation of the acquisition. “We want to maintain a low-claims profile and make sure we are transparent at all times. This is the only way foreign partners will be interested in taking equity in the business,” he says.

Nigerian President Umaru Yar’Adua has vowed to unleash the country’s potential as an emerging market by achieving double-digit growth. Ajagu takes this as a reason to expand from the insurance market into related financial services further down the line. So far, he is confident that both his sales and IT teams are highly motivated. The group has been hiring staff through an international HR agency. “In fact, we are partnering with a number of foreign consultants to meet needs such as due diligence, developing a product portfolio and devising a more efficient legal structure,” he says.

“Our overarching strategy is to transform the insurance sector in Nigeria and bring it up to international standards”

For now, the plan is to use African Alliance to provide a competitive edge to the company. One of the first steps after the acquisition was to develop African Alliance’s branch network and equip offices with the latest IT infrastructure. Its staff, business process and execution should conform to the highest standards in the market.

Essentially, only the board at African Alliance has changed hands. The company will otherwise run independently. One issue to surface post-acquisition was the new priority on claims payments. The objective here is to emphasize that it should be standard practice to make prompt claims payments. African Alliance will not only strengthen its position in the Nigerian market in this way, but also attain global standing.

Ajagu and his team are planning ahead for their next venture. Recently they acquired 70 percent in Ghana Life, the leading life insurer in Ghana, and are planning further expansion and acquisitions in the region. So far, they are allocating resources to high-performing sectors of the economy by looking at recent history and trying to make sense of where markets can go in 10 to 20 years. That is where future value calculation comes in. “Although we’re not strictly a private equity fund, investing in value is at the core of our business,” explains Ajagu.