Union Assurance recurring losses calls for restructuring

Union Assurance Plc’s recurring operating loses calls for urgent restructuring for the Nigeria insurer.

For the year ended December 2014, Union Assurance posted a loss after tax of N1.66 billion from N1.20 billion loss it recorded same period of the corresponding year (FY) 2013.

The creeping underwriting and operating costs also added to pushing the insurer into a loss position. Analysts say the company may have been forced to pay huge claims. It is also possible that some clients suffered catastrophic loss for goods insured.

Union Assurance total underwriting and operating expenses of N5 billion was higher than its gross premium income of N3.90 billion culminating in the loss.

Despite the $21.80 million ($4.36 billion) cash injection from parent company Greenoaks Global Holdings Limited, Union Assurance negative retained earnings of N4.18 billion in its balance calls for a scheme of capital reduction and reorganization.

The accumulated deficit happens when cumulative losses are greater than cumulative profits causing the account to have a negative or debit balance.

This means the company has incurred more losses in its existence than profits.

Union Assurance’s underwriting capacity was inefficient as gross premium income reduced by 4.58 percent to N3.95 billion in 2014 compared with N4.14 billion in 2013. Net premium income was down by 1.57 percent to N3.12 billion as net underwriting income dropped 2.35 percent to N3.31 billion.

The floundering performance of Union Assurance accentuates the industry’s less than one percent contribution to an economy of $510 billion (82 trillion) in the last rebased GDP estimates.

There are concerns that Insurers may not meet targets set by regulators.

National Insurance Commission (NAICOM), the body that regulates insurance business in Africa’s largest economy has set a N1.1 trillion gross premium by 2017.

Analysts say mergers and acquisitions among insurance companies will strengthen their balance sheets, re-position them to competing with other firms at the international level.

Nigeria’s economy is begging for more contribution from the insurance sector given the country’s dwindling oil revenues. Oil prices has fallen more than 40 percent slum past year.

Crude exports account for about 70 percent of government revenue in Africa’s biggest oil producer.

Union Assurance claims expenses increased by 8.69 percent to N1.51 billion in 2014 compared with N1.39 billion in 2013. Underwriting expenses jumped by 14 percent to N1.71 billion in 2014 compared with N1.50 billion last year.

Operating expenses moved by 71.84 percent to N1.77 billion in 2014 from N1.03 billion in 2013.Total assets increased by 69.97 percent to N12.30 billion in 2014 from N8.98 billion in 2013.

BALA AUGIE