Brokerage and insurance stocks power rebound in Chinese markets

South China Morning Post

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The rebound in the mainland Chinese share markets on Tuesday has brought back some cheer to investors. Photo: Xinhua

The rebound in the mainland Chinese market on Tuesday was driven by brokerage and insurance stocks after the state-owned pension fund said late on Monday it would aim to invest 30 per cent of its assets in the domestic share market, a move that could provide a 1.3 trillion yuan boost for equities.

The key Shanghai Composite Index dropped as much as 5.1 per cent in the morning, before finishing up 5.53 per cent.

Nearly 300 stocks rose their daily limit of 10 per cent, with the gains of more than 1,300 stocks exceeding 5 per cent.

Leading brokerage Guotai Junan Securities gave the market a boost when it said it would lower margin requirements for certain blue chips.

All 24 brokerages and four insurance stocks in Shanghai rose more than 6 per cent. Changjiang Securities rose 10 per cent to 13.95 yuan, while Southwest Securities added 10 per cent to 19.65 yuan.

China Life Insurance rose 8.15 per cent to close at 31.32 yuan, while Ping An Insurance jumped 7.1 per cent to 81.94 yuan.

"The strong performance of the brokerage sector is likely directly related to the volatility in the market," said Gerry Alfonso, a director at Shenwan Hongyuan Securities. "If an investor has the view that the volatility is going to continue, then he might consider buying the stocks of brokers as they are likely to have larger trading volumes.

"This seems to be the logic applied by some investors [on Tuesday]."

Meanwhile, the Hang Seng Index rose 1.09 per cent to 26,250.03 points, with mainland financial counters leading the gainers.

Guotai Junan added 4.6 per cent to HK$5.05 while China Construction Bank gained 2.2 per cent to HK$7.08.

Data from the Shanghai-Hong Kong Stock Connect showed more international investors bought in Shanghai through Hong Kong than the number of mainland Chinese buying in Hong Kong.

Average daily northbound turnover was about 5 billion yuan in January and February, but rose to 6.25 billion yuan in March and 8.62 billion yuan in April. It fell to 8.36 billion yuan in May but soared to 11.36 billion yuan last month.

The most widely traded shares in mainland China included Ping An Insurance, China Merchants Bank, Kweichow Moutai and Daiqin Railway.

Southbound trading was more volatile, with daily turnover averaging HK$1.54 billion in January, HK$786 million in February and HK$1.62 billion in March before jumping to HK$12.37 billion in April when Beijing relaxed rules to allow mainland Chinese mutual funds to invest in Hong Kong through the scheme. Turnover fell back to HK$5.44 billion in May and HK$4.36 billion last month.

The most traded Hong Kong stocks among mainlanders included Hanergy Thin Film Power Group, rail firm CRRC Corp, CGN Power and Evergrande Real Estate Group.

The average daily turnover of northbound trading in the first half stood at about 7.35 billion yuan, compared with the southbound average of HK$4.35 billion.

Bank of America Merrill Lynch said sentiment towards mainland Chinese stocks remained positive and it expected more easing measures as Beijing's monetary policy was still "exceptionally tight", despite recent cuts in interest rates and reserve requirement ratios.

"Risk-Love, our own sentiment indicator for China's equity markets, is still euphoric, despite recent declines," the bank's strategists said in a note on Tuesday.

This article appeared in the South China Morning Post print edition as Brokerage and insurance stocks power rebound

Insurance industry adds 6,000 jobs in May

The insurance industry saw a small increase in employment with the addition of 6,000 jobs for the month of May, according to the latest employment numbers from the U.S Bureau of Labor Statistics released on Friday, June 5, 2015. 

The Economic Situation Report revealed that the insurance industry grew by 0.24 percent last month and now sits at 2,539,800 employed insurance workers with an unemployment rate of 1.5 percent. Over the past 12 months, the total number of employed insurance workers has increased by 85,400 or 3.48 percent from 2.45 million in May 2014, while the unemployment rate dropped by 2.4 percent from 3.9 percent. 

Insurance carriers and related activities made up almost half of the job growth within the finance and insurance sector, which grew by 12,800 jobs last month. Over the last 12 months, the insurance carriers and related activities subsector has contributed 71.3 percent to its parent sector.

Across all industries, total nonfarm payroll employment increased by 280,000 in May, and the unemployment rate was essentially unchanged at 5.5 percent. Job gains primarily occurred in professional and business services, leisure and hospitality, and health care, while mining employment continued to decline.

After revisions, total nonfarm payroll employment for the month of March and April were revised from 85,000 to 119,000 jobs, and 223,000 to 221,000 jobs, respectively. With these revisions, employment gains in March and April were 32,000 more than previously reported. Over the past 3 months, job gains have averaged 207,000 per month.

About InsuranceJobs.com:
Established in 2006, InsuranceJobs.com is the leading insurance jobs website for insurance careers. Currently the site has over 250,000 registered job seekers and 6,500 registered employers. Users can create a profile, upload their resume, apply to positions and engage in our social communities. Employers can post insurance job opportunities and browse a resume bank for applicants. Thousands of new insurance jobs are listed each month by geographic location and specialty, including: actuarial, adjuster, agents, claims jobs, clerical, customer service, health, life, risk management, sales, investigators, insurance underwriters, workers compensation and more.

Read the full story at http://www.prweb.com/releases/2015/07/prweb12824436.htm

Fitch Affirms RMB Structured Insurance at 'BBB'/'A+(zaf)'

Reuters

(The following statement was released by the rating agency) JOHANNESBURG/LONDON, June 29 (Fitch) Fitch Ratings has affirmed South Africa-based RMB Structured Insurance Limited's (RMBSI) Insurer Financial Strength (IFS) rating at 'BBB' and Ireland-based RMB Financial Services Limited's (RMBFS) and Mauritius-based RMB Structured Insurance Limited PCC's (RMBSI PCC) IFS ratings at 'BBB'. The Outlooks are Negative. Fitch has also affirmed RMBSI's National IFS rating at 'A+(zaf)'. The Outlook is Stable. KEY RATING DRIVERS The ratings reflect the companies' strong capital positions, prudent investment policy and RMBSI's conservative use of reinsurance in its underwriting management agencies (UMA) insurance business. Offsetting these positive rating drivers is the group's small size (particularly in relation to other insurers in the market) and concentration risk, stemming from its focus on the South African market and a limited number of clients. Financial performance has deteriorated in the six months to end-December 2014 (1H15), with the RMBSI group reporting a net profit of ZAR18m (1H14: ZAR24m). Fitch expects full year profit to be weaker than 2014, mainly due to the base effect of strong investment income on structured business in 2014. The group's combined fee and underwriting income remains strong, but diversification is limited. Fitch expects this revenue base to remain broadly stable in FY15 (FY14: ZAR76m). As underwriting authority is delegated to UMAs, there could be a potential mis-alignment of interests between UMAs and RMBSI. However, Fitch believes RMBSI manages and controls this potential risk well, by careful selection of UMAs and by requiring them to agree to various conditions relating to their operation and performance. RMBSI PCC's and RMBFS's ratings reflect the companies' strong links to the RMBSI group. Fitch views RMBSI PCC and RMBFS as "Core" to the RMBSI group, as defined in the agency's insurance rating methodology, and has therefore aligned their IFS ratings with RMBSI. The Negative Outlook on the international scale ratings reflects RMBSI's exposure to the deteriorating operating environment in South Africa, which is also reflected in the Negative Outlook on South Africa's sovereign ratings (see "Fitch Affirms South Africa at 'BBB'; Outlook Negative", dated 5 June 2015, at www.fitchratings.com). The operating environment is characterised by slow economic growth and pressure on consumers' disposable incomes. Fitch expects these factors to affect the demand for insurance. The Outlook on RMBSI's National IFS rating remains Stable because this rating reflects the company's creditworthiness relative to other domestic insurers, all of which face similar difficulties from the worsening operating environment. The RMBSI group remains well-capitalised, with a capital adequacy requirement coverage ratio of 2.3x on a regulatory (interim measures) basis at 31 March 2015. The group's Prism factor-based model (Prism FBM) score was 'Extremely Strong' as at the end of the financial year ending on 30 June 2014 (FYE14). Together with strong reported regulatory solvency ratios, this supports Fitch's view that the RMBSI group has a strong capital position. RATING SENSITIVITIES Continued weakness in the economic outlook or a downgrade of the sovereign ratings would trigger a downgrade of the group's international scale ratings. A downgrade of both the national and international scale ratings could result from evidence of the group's business model being unsustainable, reflected by a sharp decline in revenue or earnings. A substantial, sustained deterioration in the regulatory solvency ratio could also lead to a downgrade as could a sustained fall by RMBSI in Fitch's Prism FBM capital assessment to "Strong" or weaker. RMBSI group's South African national scale ratings could be upgraded if there is sustained profitable growth that improves the overall scale of the company, provided the strong capital position is maintained. Given the strong links between RMBFS, RMBSI PCC and the wider RMBSI group, any movements in the ratings of RMBFS and RMBSI PCC are likely to be closely related to changes in the credit profile of the group as a whole. Contact: Primary Analyst Willem Loots Director +27 11 290 9402 Fitch Southern Africa (Pty) Ltd 23 Impala Road Sandton 2196 Secondary Analyst Anna Bender Associate Director +44 20 3530 1671Committee Chairperson David Prowse Senior Director +44 20 3530 1250 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. (a) No part of the rating was influenced by any other business activities of the credit rating agency; (b) The rating was based solely on the merits of the rated entity, security or financial instrument being rated; (c) Such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument. Applicable Criteria Exposure Draft: Insurance Notching Criteria (Proposed Methodology Changes) (pub. 12 May 2015) here Insurance Rating Methodology (pub. 04 Sep 2014) here Additional Disclosures <a href="https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame. cfm?pr_id=987128">Dodd-Frank Rating Information Disclosure Form Solicitation Status here<a href="https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31">Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Nigeria’s insurance sector rife for consolidation and growth

BusinessDay

Nigeria’s insurance sector is approaching a tipping point and is rife for consolidation and growth in the coming months stakeholders in the sector say.

“There are too many companies for the current size of the industry. This means more consolidation will happen,” Matthew Pirnie, director of Financial Services Ratings, said at theannual Nigerian Ratings and capital markets conference.

“We see the sector with potential for strong growth in the future and being extremely profitable.”

The sector as a whole recorded 18 percent premium growth in 2014, mostly on the back of compulsory motor vehicle insurance.

While this headline growth seems impressive Nigeria’s insurance sector only had gross premiums equivalent to 0.32 percent of gross domestic product (GDP) in 2014.

“The insurance regulators need to take a firm decision on consolidation,” said Rashidat Adebisi, Deputy general Manager Fincon and corporate services.

There have already been some big-ticket merger transactions in the sector since 2009, with the trend looking set to continue.

Axa SA, in December spent 198 million euros to buy a majority stake in Mansard, Nigeria’s fourth-largest insurer.

In March Paris-based Axa completed the purchase of a 7.2 percent stake in Lagos based pan-African reinsurer Africa Re for $61 million.

Liberty Holdings Ltd., the South African insurer controlled by Standard Bank Group Ltd., said in January it may conclude a deal in Nigeria soon.

Liberty, South Africa’s fourth-largest insurer said it has more than 1 billion rand ($87 million) to make acquisitions in Africa including Nigeria and plans to raise more funds if needed.

Old Mutual recently acquired a majority stake in Oceanic Life, a unit of Ecobank Transnational Inc., while Sanlam bought a minority of FBN Holdings Plc life business in 2010.

NSIA Participations SA Holdings, based in Ivory Coast, acquired a majority of ADIC Insurance Ltd., a unit of Diamond Bank Plc and Assur Africa Holding, a group of European development finance institutions, purchased GTAssurance Plc, before changing its name to Mansard Insurance Plc.

Foreign investors can now own 100 percent of Nigerian insurers, while the enforcement of compulsory policies is improving cash flow for companies.

“The benefits from international players are improved performance and better products,” said Adebisi.

Nigeria’s 60 insurers, led by Leadway Assurance Plc and AIICO Insurance Plc, had total assets of N564 billion, according to the regulator.

Analysts say further premiums gains will be driven by the anticipated strong growth in the economy, a significantly untapped insurance market and growth in the emerging middle class.

Nigeria’s economy, the continent’s biggest after South Africa, may expand by 4 percent this year , according to the International Monetary Fund (IMF) estimates.

Nigeria, Africa’s most populous nation, plans to more than triple the value of its insurance market in four years by improving the reputation of the industry, Insurance Commissioner Daniel Fola said last year.

“Our people don’t trust insurance,” he said. “We’ve done a considerable amount of housekeeping to make sure the companies respect the rules.”

The value of insurance contracts should rise to about N1 trillion ($6.4 billion) in 2017, about 3 percent of gross domestic product, from N300 billion now, or less than 1 percent of GDP, he said.

Penetration should increase to 22.5 percent of the insurable population in four years from 10 percent currently, Fola said.

Compulsory motor-vehicle insurance, which makes up most contracts now, should remain at about 10 percent by 2017, while life insurance should constitute 7 percent, general business insurance 3 percent and petroleum companies’ insurance 2.5 percent, he said.

“There are about 3 million insured individuals in the country now which is below par,” said Adebisi.

PATRICK ATUANYA

Top banks and PIC make offer for African Bank insurance unit

The Citizen

Picture: Thinkstock

A consortium of leading South African banks together with the Public Investment Corporation (PIC) has made an offer for African Bank Investment Limited (Abil) insurance subsidiary Stangen. 

Abil, the parent company to distressed lender African Bank, which went into curatorship last August under a mountain of bad debt, started business rescue proceedings on June 5. At the time it announced that it had not received any offers for Standard General Insurance Company, or Stangen, which offers credit life insurance for African Bank loans.

The company announced yesterday that it had received an offer last Wednesday from a consortium made up of Standard Bank, Absa, Firstrand, Nedbank, Investec, Capitec and the PIC. It has until Monday July 6 to consider the offer.

“This offer has various conditions and will be evaluated by the business rescue practitioners and the ABIL board of directors with the assistance of professional advisers as required,” the company said in a statement. It did not say what the conditions were, nor did it disclose the value of the offer.

ABIL plans to publish its results for the year to September last year and interim results for the six month to March by July 17. The company was not yet able to give a date when the suspension on trading of its shares will be lifted, as that is dependent on the successful conclusion of African Bank’s curatorship. Curator Tom Winterboer has said he aims to have the process of creating a “good bank” from the bank’s toxic assets completed by October 1.

Former Finance Minister Ngozi Okonjo-Iweala faults FG's $21bn unanthorised spending allegation

Press release

Abuja. June 30, 2015

THERE WAS NO “UNAUTHORISED SPENDING” UNDER OKONJO-IWEALA: $2.1 ALLEGATION IS LATEST CHAPTER OF POLITICAL WITCH-HUNT

The allegation by some governors that former Minister of Finance, Dr Ngozi Okonjo-Iweala spent $2.1 billion out of the Excess Crude Account “without authorization” is false, malicious and totally without foundation.

We want to state categorically that no unauthorized expenditure from the ECA was made under Okonjo-Iweala’s watch in the Finance Ministry. Decisions on such expenditure were discussed at meetings of the Federation Accounts Allocation Committee (FAAC) attended by finance commissioners from the 36 states.

It is curious that in their desperation to use the esteemed National Economic Council for political and personal vendetta, the persons behind these allegations acted as if the constitutionally recognized FAAC, a potent expression of Nigeria’s fiscal federalism, does not exist.

But Nigerians know that collective revenues, allocations and expenditures of the three tiers of government are the concern of the monthly FAAC meetings.

It is important to acknowledge the efforts of governors who are working hard to overcome the current revenue challenges facing their states without resorting to character assassination and blame games.

The former Minister is ready and willing to respond to legitimate enquiries about issues under her purview as Finance Minister. But it is clear that this is the latest chapter of a political witch-hunt by elements who are attempting to use the respected National Economic Council for ignoble purposes having failed abysmally in their previous attempts to tar the Okonjo-Iweala name.

It will be recalled that one of such attempts took place in May when some of these governors, hiding under the auspices of the Nigerian Governors Forum asked Okonjo-Iweala to explain $20 billion alleged to be missing from the same ECA.

The Finance Ministry subsequently issued a news release and published an advertorial in national newspapers on May 25, 2015 giving details of what the Federal Government and states received from the ECA in the last four years. It also provided details of the use of the funds for payment of petrol subsidies for the Nigerian public and SURE-P allocations to the three tiers for development purposes.

After the publication, the accusers lost their voice. But the latest allegations show that these persons are still in the business of throwing up wild, unsubstantiated figures to damage Okonjo-Iweala’s name. For instance, within the last few months, Governor Oshiomhole and his fellow travelers have asked Okonjo-Iweala to account for “missing” $30 billion, $20 billion and now $2.1 billion. What they don’t seem to understand is that the strategy has lost all credibility because the falsehood is clear for all to see. 

How can some governors who fought FG’s efforts to leave robust savings in the ECA and even took the Federal Government to court over the matter turn around to make such unfounded allegations?

The world knows that it was Okonjo-Iweala who pioneered, during her first stint as Minister of Finance in the Obasanjo administration, the practice of publishing monthly updates of all allocations to different tiers of government in order to empower Nigerians with information and knowledge of government revenues and expenditure. This enabled the Nigerian public to ask questions about the utilization of these resources. Of course many elected and appointed public officials were not happy with this development.

She continued this practice when she returned in 2011 and even added periodic updates on the Excess Crude Account, subsidy payments for verified claims by oil marketers for fuel imports as well as SURE-P payments to the three tiers of government.

Against this background, the idea that she spent $2.1 billion “without authorization” is simply not credible given that details of government receipts and expenditure are public knowledge.

We believe that Nigerians are too smart to be hoodwinked by this partisan desperation to tar the name of Okonjo-Iweala.

In the interest of the country, we advise that public officials should avoid the temptation to politicize economic issues so that balanced analysis can lead to real solutions.

Paul C Nwabuikwu
Media Adviser to Dr. Ngozi Okonjo-Iweala

26 States Withhold Implementation of Pension Scheme

VanguardBy Emeka Anaeto, Tina Akannam and Wole Mosadomi

Only 10 out of the 36 states of the federation are implementing the contributory pension scheme (CPS) designed to guarantee availability and prompt delivery of pension entitlement of workers upon retirement.

Also over N60 billion cases of non-remittances of contributions by some state governments have been reported and where the funds went into are still unknown as some of the affected states are still investigating the alleged non-remittances.

Findings shows that the complying states as at June 2015; are Lagos, Osun, Ogun, Ekiti, Kaduna, Zamfara, Niger, Delta, Rivers, Ondo and Jigawa states.

Vanguard investigations however show that 13 other states have enacted the enabling law which is the first stage in the process of implementation but they are yet to take further steps to actualise the dreams of their workers. These states are Bayelsa, Edo, Kano, Kebbi, Kogi, Sokoto, Oyo, Imo, Taraba, Anambra, Enugu, Adamawa and Gombe states.

Further breakdawn of the CPS implementation statistics at the states shows that the states behind in the implementation are still putting together the pension bill. They are Abia, Bauchi, Benue, Borno, Cross River, Ebonyi, Katsina, Kwara, Plateau, Yobe and Akwa Ibom states 10 years after the scheme took off.

The implication of the above statistics is that workers in the 26 states that are yet to commence implementation would have difficult time after retirement as many who have retired before now under the old pension scheme died without collecting their pensions.

Many reports even show deaths of several retired ex-civil servants while on queue in open fields to collect just a portion of their pension which may have been outstanding for several years, a development that had prompted the creation of the new pension scheme that guarantees prompt payment.

Prior to the enactment of the Pension Reform Act 2004, pension schemes in Nigeria had been bedevilled by many problems. The Public Service operated an unfunded Defined Benefits Scheme (DBS) and the payment of retirement benefits were budgeted annually. The annual budgetary allocation for pension was often one of the most vulnerable items in budget implementation in the light of resource constraints.

In many cases, even where budgetary provisions were made, inadequate and untimely release of funds resulted in delays and accumulation of arrears of payment of pension rights. It was obvious therefore that the DBS could not be sustained.

The Pension Reform Act 2004 as amended in 2014 established the National Pension Commission (PenCom) as the body to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

The amended act required the employee to contribute 8.0 per cent of his/her monthly salary to the scheme while the employee contributes 10 per cent as against 7.5 per cent from both sides before the amendment. The states that have started implementation before the amendment are required to up the contributions.

Through several workshops and moral suasions PenCom had engaged all the state governments in effort to get them key into the scheme as quickly as possible to save their retiring workers from the agony of post-retirement penury.