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INVESTMENT MANAGEMENT -AXA MANSARD PERSPECTIVE
Feb., 2016
AXA Mansard Investments Limited
CONTENTS
2 |
1. Domestic Economic & Market Review
2. Investment Management for the Insurance Industry
3. About Us
1Domestic Economic & Market Review
AXA Mansard Investments Limited
Nigeria: Low oil price, policy uncertainty stifling the economy & markets
4
4 |
6,8%6,2% 6,5% 6,2% 5,9%
4,0%
2,8%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 3Q15
Real GDP growth slowed to 2.8% in 3Q151 2 External Reserves remain under
pressure – dips 17% YoY to $28 billion
Inflation near double-digit: @ 9.6% in December 20153 4 FAAC dwindles – avg. @ N450b
and 35% short of sufficiency level
588 666
777 721 685
909 851
731 673 621 610 629 580
500 568
435 388 418
565
-
200
400
600
800
1 000
7,60
8,00
8,40
8,80
9,20
9,60
déc-
14
janv
-15
mar
s-15
avr-1
5
juin
-15
août
-15
sept
-15
26,00
28,00
30,00
32,00
34,00
AXA Mansard Investments Limited
Forex: Desperate times require desperate measures (unmet demand in excess of $6-8billion)
5
US Fed increased benchmarkinterest rate by 25bps in Dec-2015as investors dump emerging andfrontier markets assets.
External reserves shed 4% in 4Q15(dipped by 16% to N29.1 billion inFY15) given the seasonal festivedemand pressure as well asintensified activities of round-trippers.
USDNGN exchange ratedepreciated by 11% and 14% toN199.30 and N240 at the interbankand BDC markets, respectively inFY15. Parallel market and NDFclosed FY15 at N266 and N265/$1(after touching a high of N285/$1in Nov -15).
Average financial system liquidityincrease 3-fold to N473 billion in4Q15 from 3Q15.
5 |
Desperate timesDesperate measures
US dollar rationing by the apex bank infavor of matured LC, refined petroleumproducts and key raw material imports.
Presidency announced plans for theCBN to introduce some FX flexibility inFY16 to encourage FX inflow.
CBN stop sale of US dollar to BDCs.
The apex bank, in conjunction with thebanks, introduced varying measures tostem demand including:
Reduction to the annual US dollarlimits from $50,0000 – some bankscut down to as low as$10,000/annum.
Increasing transfer charges viadebit card channel from 0-5% toas high as 25%.
Introducing a daily offshoretransaction limit via Naira debitcards.
AXA Mansard Investments Limited
Monetary Policy – clearly loosing the FX battle… confused?
6
6 |
200
220
240
260
280
300
2829303132333435
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Jul-‐1
5
Aug-‐15
Sep-‐15
Oct-‐15
Nov-‐15
Dec-‐15
Dec-‐15
Ex. Reserves 12M NDF
050
100150200250300350400
Jan-
15
Feb
-15
Ma
r-15
Ap
r-15
Ma
y-15
Jun-
15
Jul-1
5
Aug
-15
Sep
-15
Oct
-15
No
v-15
Dec
-15
Jan-
16
Feb
-16
INTER-BANK PARALLEL MKT
-
200 000,00
400 000,00
600 000,00
800 000,00
1 000 000,00
1 200 000,00
Jan-
15
Feb-
15
Mar
-15
Apr
-15
May
-15
Jun-
15
Aug
-15
Sep-
15
Oct
-15
Nov
-15
Dec-
15
CBN cut CRR twice in 4Q15 to 20%;; in addition to reducing MPR by 2pps to
11%.
Liquidity spike following the CBN’s dovish policy in 4Q15
Parallel market FX rate trade away from official rate Offshore investors bet on currency devaluation
AXA Mansard Investments Limited
Traditional Assets – Return under intense pressure
7 |
20 000,00
25 000,00
30 000,00
35 000,00
40 000,00
9101112131415161718
20yrs Bond 10yrs
Yields have dipped by an average 300bps across the yield curve following the CBN’s dovish policy
Risk–off posture across the world, weak economic fundamentals, rising default risk weigh on equity market – shed 31% from the highest level last year
2Investment Management for the Insurance
business
AXA Mansard Investments Limited
Source: NIA Digest Swiss Re Sigma 3/14 CBN Website NAICOM Website 2013 EFInA Report
Growth has not compared favourablywith other sectors where regulatoryreforms have been strongerà Nigerian banking sector – 39%
CAGRà Telecoms - 88% CAGR
Penetration issues are drawn form thefollowing factors:
Poor awareness/credibilityHigh costs with high combinedratios (+100%)Sub-par product development
-‐
50
100
150
200
250
300 Industry GPW N‘bn
Nigeria Insurance industry: Largely underpenetrated
Industry operatorsà Reinsurers – 2à Underwriters – 58à Brokers – 577à Loss Adjusters – 54
Number of insured individuals – 1.5million(2012)Insurance Penetration - 0.3% (2014)Insurance Density - $10.0 (2014)Both insurance penetration and densityrate are a far cry from the African average(Penetration 2.8% and Density $61)
Industry Growth Trends Industry Fact Sheet
Major African Insurance Hubs
CountryGPW $ million
Penetration Rate %
Life Penetration
Rate %
Non -Life Penetration
Rate % Density $South Africa 49,159 14 11.4 2.7 925Morocco 3,400 3.2 1.1 2.1 102Egypt 1,968 0.7 0.3 0.4 24Nigeria 1,790 0.3 0.1 0.2 10Kenya 1,784 2.9 1 1.9 39Algeria 1,597 0.7 0 0.7 40Angola 1,142 0.8 0 0.8 52Namibia 931 7.2 5 2.2 396Tunisia 888 1.8 0.3 1.5 80Mauritius 766 6 4.1 1.9 613
9 | 8 |
AXA Mansard Investments Limited
Top-Down + Bottom-Up Approach =
Performance e
t
Historical Nigeria Insurance Industry Average Return on Investment
6,94%
8,62%
8,94%
8,25%
5,91%
5,00%
5,50%
6,00%
6,50%
7,00%
7,50%
8,00%
8,50%
9,00%
9,50%
2010 2011 2012 2013 2014
10 |
AXA Mansard Investments Limited
However, Private Equity continues to provide respite for investors
9 |
Source: ACA, Private Equity Growth Capital Council, 2015
AXA Mansard Investments Limited12 |
Constructing tailored solutions
Distilling the opportunities with Insurance-Appropriate Lenses
Leveraging on strong research capability
Regulatory Capital ConsumptionÈ Solvency requirements È Other NAICOM guidelinesÈ Appropriate capital allocation
AccountingÈ Optimize income (IFRS)È Realized loss limitsÈ Downside risk
Client-Specific Input and GuidelinesÈ Asset/liability managementÈ Liabilities reflective asset allocation
strategyÈ Maximize risk adjusted returnsÈ Sustainability and governance
Optimal PortfolioReflecting unique risk/return considerationsReview opportunities across the
global markets
Insurance investment management – driven by regulatory guidelines, diligent research and risk-return considerations
AXA Mansard Investments Limited
Top-Down + Bottom-Up Approach =
Performance e
t
A restrictive insurance industry… Investment managers leading the charge
Some provision in insurance guideline Recommendations by the investment managersReinsurance arrangement (oil & gas) –deductible must be more than 2.5%and 5% of shareholder fund forconstruction and operational riskrespectively where excess loss ofreinsurance is purchased. The reverseapply for proportional treaty/facility.
5% cap may be to restrictive as borrowing maybe a cheaper source of funds. Some insurancecompanies currently have up to 30% gearing.
Defines “investment and relatedfunctions’ as core activities that cannot be outsourced.
The definition contradicted another provision that“no insurer can outsource its investment functionwithout an approval from the commission”.
A provision in the guideline also require a writtencontract between the insurer and asset manager.
The need to include registered mutual funds andother alternative assets as the industry evolves.
14 |
AXA Mansard Investments Limited
Top-Down + Bottom-Up Approach =
Performance e
t
• Focus: Allows the insurance company leverage on its underwriting strength leaving investment management to the experts
Benefits of outsourced investment business
• Cost savings: No need to replicate functions/departments required for asset management.
• Research: Investment managers are experts in rigorous fundamental and technical research; enabling the insurer stay ahead of change
• Regulatory evolution: Investment managers possess extensive experience to help insurance companies meet regulatory requirements, risk management and reporting
13 |
3About Us
AXA Mansard Investments Limited
GRO
SS P
REM
IUM
WRI
TTEN
EV
OLU
TION
IN N
m(2
004A
–20
15E)
IND
USTR
Y RA
NKI
NG
97th 28th
INV
ESTO
RSKE
Y BU
SIN
ESS
DEV
ELO
PMEN
T
> Commenced bancassurance operations in partnership with GT Bank
> Started Asset Management activity
> Bancassurance partnership agreement signed with FCMB
> Opening of 4 Mansard Welcome Centres in Lagos and a full branch in Abuja
>Commercial real estate sector entered with Mansard Place
> Launch of Mansard HMO
> Gains NAICOM approval to offer micro insurance products
> Acquired Pension Fund Administrator
CO
RPO
RATE
M
ILES
TON
ES
> Underwent restructuring and recapitalisation
> Listed on the Nigerian Stock Exchange
> Rebranding of GT Assurance to become Mansard Insurance
> Brand upgrade to become AXAMansard Group
136 488 1,0672,062
4,1445,378
7,521
10,005
12,44413,594
17,400
2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A
EXIT
Ranked in the Top 10 Insurers in Nigeria
ENTRY
16
AXA Mansard: Our journey so far …
8 5 4 3
16 |
AXA Mansard Investments Limited
Retail Business Division
Health InsuranceInstitutional Business Division
Asset Management
Pension Fund Administration
Shared Services
Risk Investment
SynergiesDistribution
AXA-Mansard
1717
AXA Mansard: Currently segmented into 5 distinct businesses
AXA Mansard Investments Limited
Our investment philosophy: to secure the future for our clients
18 |
Experience Innovation
Risk Management Execution
Value for client
Our experienced team across asset classes seek market opportunities; but more important are the creative approaches and best executions to
capture best risk-adjusted returns on behalf of our clients.
AXA Mansard Investments Limited
Standard solutions for varying risk profiles
20 |
High
Returns
Medium
AXA Mansard Balance Portfolio
AXA Mansard Income & Growth Portfolio
AXA Mansard Fixed Income Portfolio
Low AXA Mansard Money Market Portfolio
LowMedium High
Risk
AXA Mansard Dynamic Portfolio
AXA Mansard Strategic Portfolio
THANK YOU