Goldlink Insurance post`s N731.46 million loss on rising claims expenses

The huge claims expenses incurred by Goldlink Insurance Plc are responsible for the Nigeria insurer’s loss position in the most recent quarter, culminating in a high combined ratio fast approaching the 100 percent threshold.

This is in addition to lower premium incomes recorded by the insurer as it repositions to improve its performance with a view to reverting to the path of profitability.

For the first six months through June 2015, Goldlink posted a loss after tax of N731.46 million, which is higher than the N114.85 million losses recorded the same period of the corresponding year (HY) of 2014.

BusinessDay calculations shows the company’s losses were as a result of a 163.90 percent surge in total claims to N940.80 million in 2015 as against N356.50 million in 2014.

Claims ratio also increased to 98.76 percent in 2015 as against 30.97 percent in 2014. This means for every N100 generated in premium income (sales), Goldlink spent N98 on claims.

The rising claims payments by the Nigeria insurer resulted in combined ratio (CR) spiking to 96.58 percent in 2015 as against 53.83 percent in 2014.

When the combined ratio is under 100 percent, underwriting results are generally considered profitable; when the combined ratio is over 100 percent, underwriting results are generally considered unprofitable.

A combined ratio in the insurance world is the combination of claims ratio and expense ratio.

It will be recalled that an interim management board was inaugurated in November, 2012 by the National Insurance Commission to carry out full investigation of the financial report and corporate government failure observed in the course of the review of the company’s financial statements for 2011 accounting period.

Goldlink’s top lines also floundered as gross premium income fell by 19.18 percent to N1.40 billion in June 2015 from N1.72 billion in 2014.

The firm’s gross premium income fell by 14.60 percent to N1.17 billion in 2015 from N1.37 billion in 2014.

Underwriting capacity was inefficient as net premium income dipped by 17.20 percent to N952.16 million.

Insurance penetration in Africa’s largest economy has been low over time as religious superstitions, poverty, weak consumer spending, and lack of awareness on the importance of a package continues to hurt to the sector.

Further analysis of the financial statement of Goldlink shows the insurer has negative retained earnings of N11.57 billion while shareholders fund was a negative N4.43 billion.

This means the company has been recording more losses than profit throughout its existence.

The company’s share price was N0.53 on the floor of the exchange while market capitalization was N2.41 billion.

 

BALA AUGIE