Continental Re maintains growth momentum as premium income surged

Continental Re Insurance Plc has maintained its growth momentum as third quarter premium surged, a stellar performance that means the company’s geographical diversity has yielded fruit amid tough operating and macro conditions bedeviling the sector. 

Analysts say the growth at the top line means the company’s selective approach to underwriting risk selection supported by development of strong customer relationship is also responsible for the growth trajectory.

Continental Re has been consistently recording growth in premium income since 2013, based on data compiled by Businessday.

For the first nine months through September 2015, Continental Re’s net insurance premium revenue increased by 25.53 percent to N12.91 billion as against N10.30 billion the previous year. Gross premium written jumped by 26.04 percent to N15.10 billion as the company intends to make inroads into Africa markets through aggressive acquisitions.

Continental Reinsurance Plc plans to acquire rivals across Africa over the next three years as the company pursues aggressive expansion with a view to increasing its share of the market.

The company also plans to raise significant capital this year through equity sales to enable it to take advantage of the country’s growing population that crave for insurance.

Investors and shareholders of the company need not fret as the company’s combined ratio (CR) of 90.08 percent, which is below the 100 percent threshold, signals strong financial strength

The trend of Continental Re’s shows CR was 82.08 percent in March 2014, 88.08 percent in June 2014 while it moved up to 90.30 percent as at September 2014. In December 2014 the CR fell to 90.03 percent.   In 2015, the ratio moved fell to 89.09 percent in March from 93.68 percent in June while dipping to 90.19 percent in September.  The favorable CR culminates in a positive  real underwriting performance in the period under review as underwriting profit increased by 25.74 percent to N1.27 billion from N1.06 billion recorded last year.

Continental Re’s insurance claims and loss adjustment expenses grew by 23.36 percent to N6.33 billion in 2015 as against N5.09 billion last year; this means the insurance firm is aggressive about settlement of claims to policy holders. Claims ratios otherwise known as loss ratio fell to 49.07 percent in the period under review compared with 49.41 percent in 2014.  Underwriting expenses were up by 26.44 percent to N5.30 billion in September 2015, from N4.19 billion last year. Underwriting expense ratio reduced to 41.05 percent in the period under review as against 40.67 percent last year.

Despite the impressive performance of Continental Re, premium penetration in Africa largest economy remains low on the back of low disposable income, lack of trust and cultural and religious and cultural beliefs.

In the last rebased GDP, the sector contributed less than 1 percent to an economy of $510 billion.

These challenges make the country’s market underdeveloped and fragmented despite its huge population.

According a 2015 report by KPMG on the insurance sector, there are 32 non-life insurers, 17 life insurers, and 10 mixed companies catering for a total market of $1.6 billion (N320 billion). That gives an average of $28 (56 billion) premiums per insurance.

The aforementioned figures are abysmal when compared with South Africa, the continent most developed economy that has 179 insurance companies, but it serves the market of $51.6 billion (N103.20 billion), the average company size is more than 10 times bigger than Nigeria, according to the report.

Premium income for the insurance and reinsurance industry is expected to improve as regulators enforce rules requiring companies with at least five workers to provide life coverage. The National Insurance Commission is also making property insurance mandatory in the nation of more than 170 million people.

The Abuja based Insurance company has been intensifying efforts on its ‘No Premium No policy’ aimed at deepening insurance penetration and putting the sector on a global competitive arena.

The act stipulates that the receipt of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk, unless the premium is paid in advance.

Continental Re’s top line impressive performance trickled to the bottom line as net income increased by 12.50 percent to N1.53 billion in 2015 as against N1.36 billion last year. Total assets moved by 8.93 percent to N30.72 billion in the period under review compared with N28.20 billion in 2014.

The company is utilizing the resources of its owners in generating higher profit as return on equity (ROE) jumped to 10.09 percent in 2015 compared with 9.20 percent the previous year. Return on assets increased to 4.92 percent in 2015 as against 4.82 percent in 2014.

Continental Re’s share price closed at N1 on the floor of the exchange while market capitalization was N10.73 billion.

BALA AUGIE