An investment expert and CEO of Cowry Asset Management Limited, Mr. Johnson Chukwu, has said that FBN Holdings divested from its insurance firm, FBN Insurance, in order to focus more on its core business area and streamline operating costs.
Speaking on Channel TV’s Business Morning recently, Chukwu said, with the sale of its 65 per cent stake in FBN Insurance, which is ranked the 2nd largest life insurance company in the country, FBNHoldings would now be able to focus on its core area of business, which is banking.
His words: “My take is that the divestment was basically for the bank to remain to in its core area of business. As you may know, FBN Holdings has commercial banking arm, investment banking arm, asset management and insurance.
“So if you take out the FBN Insurance, then you see that the other subsidiaries are largely on banking services. I think what the bank wants to do is to obviously optimize each cost and focus more in its core competence.”
Chukwu emphasized that the holding company sold its stake in FBN Insurance not because the insurance company was not doing well, looking at its 2019 performance.
According to him, “interestingly, when I look at the institution they sold, it is not because basically FBN Insurance was not doing well looking back at its 2019 performance.
“FBN Insurance contributed 10 per cent of their profit and about N6 billion to their gross earnings, which means what they did was obviously to step away from an area that they considered no longer core to their operation.”
Asked why the holding company had not sold its insurance brokerage arm, Chukwu said, “Virtually all banking services require some level of cover. So the insurance brokerage business will continue to compliment its core business of banking.”
The investment expert stated: “I think it is still integral to have their insurance brokerage firm as it will align with their core business of banking.”
He also added that he believed the move (of selling the insurance company) will add substantially to the group’s bottom line by engendering a lot of improvement in its operating cost.
Chukwu explained that Sanlam Holdings, the emerging market, which on its own is of no mean strength, will bear all the assets and liabilities of the sold insurance company.
“They are already taking up a company of a balance sheet of over N100 billion and a shareholders fund of about N22 billion. So they will also inherit all policy holders’ underwriting in FBN Insurance.
“Remember that Sanlam Holdings is one of the biggest institutions in Africa; they are in about 44 countries in the world and about 33 countries in Africa. And they are leading in 11 of those countries in Africa where they operate, so I don’t think any policy holder in FBN Insurance would have to worry because the company is being transferred to an institution that is one of the strongest in Africa,” Chukwu said.
He stated that what FBN Holdings had done is not strange either in the local or international banking space, adding that both FCMB and GTB and many universal banks in the international banking space had previously done the same thing.
