Africa Alliance Insurance is in growth spurt as third quarter (Q3) 2014 gross premium income surged 73.49 percent as the Nigerian insurer seeks organic growth, analysis of the financial statement shows.
For the first nine months through September 2014, the company’s gross premium income surged by 73.49 percent to N7.79 billion from N4.49 billion the same period of the corresponding year (Q3) 2013.
Net premium income followed the same growth trajectory as it also spiked by 75.79 percent to N7.77 billion compared with N4.42 billion the preceding year, while gross premium written spiked by 73.02 billion last year.
The stellar performance shows the Nigeria Insurance Commission (NAICOM No premium, No cover regulation) is helping the insurer unlock the potentials in the Nigeria robust economy.
This is a section of the 2003 Insurance Act that stipulates that premiums must be paid for before an insurer can incept cover. This regulation was enforced by the regulator – NAICOM – with effect from January 1, 2013.
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The full implementation of the policy has help bolster insurance firms liquidity position as premiums are collected when due. It has also helped insurance firms reduce unpaid bad debts that would have been irrecoverable, thus boosting their cash and also enhancing the cash flow.
The insurer’s impressive results are not limited to the top-line as profit after tax (PAT) increased by 14.86 percent to N871.44 million in the current period, from N758.66 million the same period of the corresponding year (Q3), 2013.
Operating profits were up by 41.61 percent to N1.21 billion in the review period from N854.40 million last year. It means the company should cut down costs to further boost profitability.
A 129.33 percent rise in net claims expenses to N5.55 billion in Q3 2014 as against N2.42 billion the preceding year, which left underwriting profit flattish at N1.53 billion. Analysts have caveat that the rising costs of the company may shrink profits thus affecting dividend paying abilities.
Total assets were up by 28.84 percent to N20.68 billion in Q3 2014, as against N16.05 percent fuelled by a 56.73 percent increase in financial assets.
Shareholders fund increased by 19 percent to N5.45 billion in Q3 2014, compared with N4.58 billion the preceding year, though a negative retain earnings of N19.64 billion shrank shareholders fund.
The negative shareholders fund was a result of recurring losses recorded by the company in the past, though it reverted to profitability as shown in the 2013 audited financial statement.
Despite the opportunities in the Nigeria economy, there are still challenges befalling firms operating in the insurance industry as the latest rebased GDP showed the sector contributing less than 1 percent to the economy.
Analysts say one of the impediments to the growth of the sector is lack of trust by policy makers and inability of insurers to come up with innovative and market penetrating products.
The future is stellar for Africa Alliance as there are opportunity for growth. Nigeria’s insurance sector in the next four years is estimated at $105.24 billion, to be driven by the automotive policy, oil and gas and housing.
Africa Alliance’s share price closes at N0.50 on the floor of the exchange while market capitalisation was N10.30 billion.
BALA AUGIE
