AIICO Insurance underwriting profit surges amid rising claims expenses

AIICO Insurance Plc’s underwriting profit surged 116.12 percent amid rising claims expenses as the company continues to operate in an adverse operating environment.

Underwriting profit for the nine months through September was N5.36 billion as against N2.48 billion, the previous year. Net premium income (NPI) increased by 68.88 percent to N16.77 billion was due to an 85.12 percent decline in change in unearned premium to N1.76 billion.

The aforementioned stellar performance means the company’s underwriting capacity is efficient and shareholders’ wealth maximized.

While AIICO insurance’s premium income and underwriting profit are spiking, claims to policy holders are rising on the back of high pay-out on third party motor vehicle insurance.

The Nigerian insurer claims expenses are up 83.98 percent to N10.80 billion, while claims ratio moved to 64.46 percent in the period under review as against 59.93 percent the previous year.

Insurers in Africa’s most populous nation are paying more claims to policy holders as a recessionary environment has forced them to reduce their risk adjusted premium to accommodate weak consumer spending.

Experts are of the view that claims are mounting due to rising inflation because insurers have to pay according to the adjusted figures, and prices have gone up.

Inflation for the month of October jumped to 18.30 percent, the highest in 11 years, which means there will be little money left in the pockets of consumers to buy a policy.

‘There are a lot of big claims in the industry today because many organisations in the country are having big issues that are affecting their profitability,” said Funmi Babington-Ashaye, managing director of Risk Analyst Insurance Brokers Limited.

Consumers are also gradually jettisoning their life policies and this latest development could undermine the growth of companies that crave for higher premiums and profits.

The latest gross domestic product (GDP) data released by the National Bureau of Statistics (NBS) means insurers should brace up for a tough 2017 as Nigeria’s economic slump deepens with a sharp drop in oil.

The country’s GDP contracted 2.2 percent in the three months through September from a year earlier, after shrinking 2.1 percent in the second quarter, according to the NBS.

Insurance contracted 1.22 percent in the third quarter of the year from 3.72 percent in the second quarter, according to the NBS data.
AIICO insurance combined ratios for the first nine months through September was 78.41 percent, down from 86.80 percent the previous year.

A measure of more than 100 means the unit is paying out more in claims and costs than it is collecting in premiums. That is a sign of sound financial health.

AIICO Insurance has utilised the resources of shareholders to generate higher profit as return on equity (ROE) increased to 30.83 percent in 2016 from 28.70 percent the previous year.

The company’s return on asset (ROA) moved to 3.57 percent in 2016 as against 3.35 percent the previous year. Net income was up 13.01 percent to N3.04 billion.

 

BALA AUGIE