• Monday, March 04, 2024
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BusinessDay

Mutual Benefits Assurance profit surges on reduced costs

health-insurance

 

Mutual assurance Plc’s half year profit has surged 345.02 percent, a performance that means the cost control mechanisms installed by the savvy management and boards of directors of the insurer has yielded dividend.

This puts the company in an upside position to give a high returns to shareholders while increasing their market value.

Profit was N2.66 billion in 2015, from N597.77 million the previous year.

Profit before tax (PBT) spiked by 241.96 percent to N2.74 billion in the review period as against N801.13 million last year.

The upswing at the bottom line is attributable to a sharp fall in operating expenses stoked by effective cost control mechanism on the part of management.

Management expenses fell by 36.91 percent to N2.29 billion in June 2015 as against N3.63 billion in June 2014.

The cost cuts explain the favorable combined ratio (CR) of 60.01 percent. In the insurance world, a CR below 100 percent means the company is profitable and efficiently run.

Mutual Benefits operating expenses (OPEX) ratio of 39.03 percent is the lowest among the insurance firms based on data collated by BusinessDay.

The 36.03 percent Opex ratio means the company is spending less on operating expenses to generate each unit of premium.

The company is aggressive about the payment of claims to policy holders as claims ratio increased  to 27.43 percent in June 2015, as against 25.87 percent as at June 2014. Claims expenses were up 28.88 percent to N1.61 billion.

Mutual has been reeling out innovative products that address the immediate needs of the people.

The Nigerian insurer has signed an MOU with members of the National Union of Road Transport Workers (NURTW) and market women with a view to deepening insurance penetration.

Mutual Benefits also had a remarkable upswing at the top line as net premium income increased by 21.53 percent to N5.87 billion in June 2015 compared with N4.83 billion the last year.

Gross premium earned jumped by 41.13 percent to N8.44 billion in June 2015 as against N5.98 billion as at June 2014.

Underwriting profits were up by 25 percent to N3.40 billion in June 2015 compared with N2.72 billion the previous year.

While Mutual Benefit’s posted impressive results the review period, its stock market share price which is trading at N0.50 or par value since 2010 calls for another recapitalization and a scheme of mergers and acquisitions.

Restructuring the company’s debt to equity mixture will make its capital structure more stable and increase its share value.

The company’s market capitalization was N4 billion while the return on equity (ROE) was 27.03 percent in the period under review.