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NAICOM replies Alliance & General Insurance, insists suspended firm not corporate governance compliant
By Nkechi Naeche
August 9, 2012 19:31:39pm GMT
Fola Daniel, Commissioner for Insurance

WorldStage Newsonline-- The National Insurance Commission, (NAICOM) on Thursday responded to yesterday’s statement of Alliance & General Insurance that faulted the suspension of its licence, saying the claims were far from the truth.

Alliance and General Insurance Plc, had on Wednesday denied allegations of any wrong doings leading to the suspension of it operating license by NAICOM, insisting that its operations were fully in line with good corporate governance and the interest of its clients and shareholders.

A&G said  that the Financial Reporting Council was not thorough enough in recommending to NAICOM to suspend the management teams of Alliance & General Insurance Limited and Alliance & General Life Assurance Plc from operation and also panelised over N100 million, because they no longer exist and the account in question had been withdrawn by the board.

The statement noted that unless there is a deliberate intent to bring down Alliance & General Insurance Plc, FRC and NAICOM should not have hastily taken a decision against it based on issues against the two former companies whose merger was well approved by NAICOM and other relevant authorities

 “So is NAICOM saying that the company that emerged from it approval of the merger of two others is suddenly insolvent after a month. Moreover the solvency margin of Alliance & General Insurance Company Ltd for 2010 Alliance & General Life Assurance Plc for 2009 and which stood at N6,317,314,326 and N8,068,614,944 respectively and  was fully approved by NAICOM and 2010. It follows then, that NAICOM’s scrutiny capability is in question.£

But NAICOM in its reply  through Head Corporate Communication, Lucky Fiakpa, said that even the issues raised in their statement to the press cannot add up, adding that they claim that they paid some money out recently as claims and wonder “how the allegation of solvency came up”.

It further said that: "there is a difference between solvency and liquidity, adding that a company can be technically insolvent and yet liquid.

According to the commission' Solvency is prescribed by law and it is usually tied a minimum amount; in this case N3 billion or 15 per cent  of net premium (whichever is greater) for non-life business. Anything short of this amount would make the company technically insolvent.

It further said that:" Solvency looks at the totality of the company’s liabilities to the policyholders compared with available admissible assets to meet same.

On the sanctioning of the two companies since they have merged into one entity following approval given to them by NAICOM, the commission said that the merger they are relying on is a post-2010 event, adding that the issues in contention are on the 2010 financial statements of the companies and that as at 2010, no merger had been consummated.

The commission noted that only approval-in-principle was granted by the Commission as no final approval has been granted.

On the account, the commission said that it had been withdrawn by the board, adding that what led to the withdrawal of the said accounts was not stated, adding that the companies submitted two different sets of audited financial statements for each company for the year ended 31st December, 2010 and could not provide satisfactory explanations/justifications for this action, which clearly shows irregularities in the companies’ financial reporting format.         

The Commission noted that apart from that, "the companies could not provide relevant support to validate most figures reported in these financial statements, adding that the non-disclosure of liabilities of N507million due to Corporate Affairs Commission in respect of its staff retirement benefits scheme and the pending legal action on the Company; non-disclosure in 2010 audited accounts, the company’s tax liabilities as well as liabilities on Bank loan/Overdraft facilities taken over by AMCON."        

NAICOM noted that the companies had issues with AMCON, FIRS, CAC, FRC to attend to rather than deal with the issues raised in the accounts by NAICOM, the companies decided to cancel them forthwith and commissioned a new Auditor to prepare a set of fresh audited accounts for 2010.

It added that they also applied to NAICOM to withdraw the 2010 audited accounts and the restated version earlier submitted to the Regulator, that their claim that they were “not given fair hearing” in all that transpired was falsehood in bold print.

The commission further said that  "In view of the regulatory infractions and on the suspicion of various financial reporting and corporate governance abuses by these companies and their auditors, adding that the Commission decided to enlist the collaboration of the Financial reporting Council (FRC) in dealing with this matter.

It words: “We also required the Auditors to confirm that the different sets of accounts issued for the same companies and for the same period were actually audited and certified by their firm."

"Consequently, the FRC convened several meeting with A & G Insurance Team and NAICOM in attendance. In the course of these meetings, additional information/facts and issues emerged in respect of the 2010 financial statements, which  included: non-disclosure of significant transactions that could materially affect the true and fair view of the 2010 financial statements of the companies; resolutions passed by the Board of the companies and communicated to both NAICOM and FRC that “since NAICOM has refused to approve their restated accounts, they have cancelled the two accounts (the restated and original) and asked the new Auditors- Baker Tilly Nigeria to prepare fresh accounts for 2010”;

NAICOM said that confirmation from AMCON that: "Fidelity Bond Group (which is the parent company of A & G Insurance) equally has outstanding liabilities for bank loans/overdraft facilities and these accounts have been taken over by AMCON;        conflicting identity of the Chairmen of Board of Directors of A & G Life and General Insurance Companies.

It noted that at the closing meeting between the FRC and the companies was held on July 31, 2012 Lagos, with representatives of their external Auditors (both disengaged and new), AMCON, ICAN and NAICOM in attendance.

"At the end of the FRC investigation the following conclusions were reached: that the non-consolidation of subsidiaries, the several accounting abuses noted in the 2010 financial statements, the tax issues (non payments and disclosures) dating from 2007 and the Companies Liabilities now unnecessarily held by AMCON are strong enough to mislead a significant stakeholder.

"The corporate governance of the companies are unclear and very worrisome and the Policyholders are exposed to untold risks due to the inadequacy of the assets cover and poor solvency margin/capital bass of the companies.     

The approach to changing external Auditors and the confusing assignment given to them are questionable, adding that NAICOM was requested to suspend the management of the companies and appoint interim managements which shall recommend firm of external Auditors to NAICOM to carry out sustentative audit of the companies.

The statement noted that the companies were penalized with the sum of N50million each for non compliance with the Statement of Accounting Standards, besides regulatory accounting and corporate governance abuses, adding that the  penalties are to be paid within the next seven working days.

It would be recalled that on Monday this week, NAICOM, suspended Alliance and General Insurance Company Ltd, A&G Life Assurance Plc and Fidelity Bond Insurance Brokers from transacting further insurance business for a period of six months with effect from August 6, 2012.

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