Insurers show strength in Q1 amid mounting claims

Insurance firms in Africa’s most populous nation have shown strength in the first quarter of 2016 amid mounting claims as they maintained a favourable combined ratio (CR).

The average CR of 12 quoted insurance firms stood at 75.83 percent in the first three months of the year despite macroeconomic headwinds.

CR is the combination of an insurance company’s claims ratio and expense ratio. A CR of below 100 percent means a firm is profitable and there no threats to its going concern status.

Analysts across a broad spectrum believe that the CR ratios are the best way to measure the success of a company because it does not include investment income and only includes profit that is earned through efficient management.

Combined Ratios of select Insurance Companies
Company	CR (per cent)
Continental Re Insurance Plc	95
Cornerstone Insurance Plc	90
Law Union Rock Plc	70
AXA Mansard Insurance Plc	77
NEM Insurance Plc	46
Prestige Assurance Plc	67
Staco Insurance Plc	50
Unity Kapital Assurance Plc	45
Wapic Insurance Plc	79

Source: Companies’ financial statements, BusinessDay C&M analytics

 “The combined ratio of 75.83 percent shows that there companies are still making a profit albeit a small profit,” said an actuarist with one of the big insurance firms, who preferred to be anonymous, because of the sensitivity of the matter.

On the other side of the spectrum, some insurance companies underperformed peers as their CR exceeded the 100 percent threshold.

For instance, AIICO Insurance and Lasaco Insurance recorded CR of 101 percent and 108 percent respectively.

Industry players say despite the leeway as evidenced by the impressive CR, insurers are grappling with declining underwriting profits arising from falling rates as well as cost of assets replacement.

Gross premium written (GPW) in the review period surged 16.30 percent from N43.44 billion recorded last year.

Claims have also risen since the onset of economic recession as evidenced by increased filing on motor insurance which were ignored before now.

The cumulative underwriting profit of the 12 most liquid insurance firms dipped by 20.91 percent to N7.20 billion from N9.11 billion the previous year.

Claims expenses of these firms declined by 19 percent to N12.36 billion in March 2017 from N10.39 billion as at March 2016.

The National Bureau of Statistics (NBS) data showed that Nigeria’s economy contracted by 0.52 percent in the first quarter of the year as the country suffers its first recession in 25 years.
Inflation for the month of April was 17.20 percent, the highest in 11 months. Unemployment rate for 2016 rose to 7-year high, standing at 14.20 percent in 2016.

Nigeria’s insurance industry is at an embryonic stage with only about 6 percent of an estimated 180 million people having some form of insurance at the end of 2015, compared to about 4 percent in 2013, according to Nigerian Insurance Association.

 

BALA AUGIE