Equity Assurance high combined ratios responsible for loss position

Equity Assurance Plc’s high combined ratios are responsible for its recurring losses, analysis by BusinessDay shows.

The combined ratios, a measure of profitability, are used by insurance companies to indicate how well they are performing in their daily operations.

A ratio below 100 percent indicates that the company is making underwriting profit while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.

For the first six months through June 2015, Equity Assurance recorded a loss after tax of N249.61 million from N147.67 million the previous year.

The company had a combined ratio of 130 percent in the period under review, which signals operating inefficiencies.

Equity Assurance’s had operating expenses swallowing most of profits as operating expense ratio was as high as 1.09 percent, which means the company spent N109 to generate N100 it generates from premiums.

Operating expenses increased by 41.17 percent to N1.44 billion in June 2015 as against N1.02 billion the previous year.

The Underwriting firm, Equity Assurance Plc, had  settled over N630.72 million as claims to its customers between January 1 and September 30, 2014.

There are signs of growth potential in Nigeria’s insurance sector as foreign investors are in talks with regulators for a stake in the country’s growing market.

BusinessDay had reported earlier that Nigeria’s Unic Insurance, a life insurance company and Equity Assurance are among the companies in the investors focus.

Nigeria’s insurance industry, with 60 underwriters, raked in over N300 billion premiums in 2013 on the strength of growing confidence and adherence to strict corporate governance, which now endears it to foreign direct investors.

Equity Assurance net premium earned fell by 1.19 percent to N1.66 billion in June 2015, from N1.68 billion the in June 2014.

Gross premium written dipped by 7.30 percent to N2.41 billion in June 2015 from N2.60 billion the previous year. However, net premium written (NPW)  jumped by a mere 2.77 percent to N2.22 billion compared with N2.16 billion in June 2014.

Investment income increased by 93.88 percent to N319.32 million compared with N164.70 million the previous year.

Total assets reduced by 0.84 percent to N9.42 billion while shareholder’s fund was N3.36 billion.

Equity Assurance share price closed at N0.50 while market capitalization was N4.42 billion.

 

BALA AUGIE