A low combined ratio means Niger Insurance Plc is profitable and in sound financial strength as the company continues to grow premiums amid macro conditions bedeviling the industry.
Niger Insurance combined ratio of 67.62 percent in the period was lower than the 100 percent threshold indicating that the company is making underwriting profit while receiving more premiums than paying claims.
A combined ratio in the insurance world is the combination of claims ratio and expense ratio.
As a result of the lower CR, Niger Insurance recorded positive real underwriting results of N2.65 billion.
In the third quarter of 2015, the Nigeria insurer was cost effective as underwriting expenses were down by 16.23 percent to N1.83 billion from N2.18 billion last year. Under writing expense ratio reduced to 22.24 percent in 2015 from 28.82 percent last year.
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Despite the impressive performance of Niger Insurance, insurance penetration still remain low in Africa’s largest economy given the sectors less than one contribution to an economy of N100 trillion ($510 billion).
The slow economic growth with its attendant high unemployment rate, poverty and cultural beliefs makes it practicably difficult for people to buy insurance.
With over 63 percent people within the poverty range and consumer wallets pressured as result of inflation, people are likely to spend the little they have on consumption than invest in insurance.
These challenges explains the gap between Nigeria and other sub Sahara Africa countries like Kenya and South Africa where premium penetration is growing on the back of strong consumer spending and innovative products.
According a 2015 report by KPMG on the insurance sector, Nigeria has 32 non-life insurers, 17 life insurers, and 10 mixed companies catering for a total market of $1.6 billion (N320 billion).
The aforementioned figures are low when compared with South Africa, that has 179 insurance companies, that serves the market of $51.6 billion.
While Nigeria is grappling with low penetration, Niger Insurance’s gross premium income (GPI) increased by 5.40 percent to N8.35 billion in September 2015 as against N7.92 billion last year. Net Premium Income (NPI) moved by 5.82 percent to N8.0 billion in 2015 as against N7.56 billion the previous year.
Further analysis of the financial statement of Niger Insurance showed net underwriting income were up by 6.13 percent to N8.13 billion in the period under review as against N7.66 billion last year. Underwriting profit increased by 14.34 percent to N2.71 billion.
Niger Insurance is aggressive about payment of claims to policy holders as net claims increased by 15.62 percent to N3.58 billion in 2015 from 3.0 billion last year.
The company’s share price closed at N0.50 while market capitalization was N3.87 billion.
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