Equity Assurance records strong premium income amid economic downturn

Equity Assurance has recorded a double digit growth in premium income amid a slow growing economy as the Nigeria insurer remains profitable given a stable loss and combined ratios.

Analysts attribute the impressive results to the company’s integrated plans, revenue synergy activities and ability to maintained proved reserves in a tough operating environment.

For the first nine months through September 2016, Equity Assurance’s grow premium income moved by 18.45 per cent to N3.98 billion as against N3.65 billion the previous year.

Net premium income increased by 2.44 per cent N2.67 billion in the period under compared with N2.44 billion as at September 2015. Net underwriting income grew by 11.71 per cent to N2.86 billion.

Equity Assurance’s combined ratio of 74.53 percent is lower than the 100 threshold, which means the company is profitable and there are no threats to going concern.

The company’s claims ratios increased to 51.40 percent to N1.22 billion in the period under review as insurers in the country are recording high pay out due to rising motor accidents insurance and an economic downturn.

Claims ratios moved to 45.65 per cent in September 2016 from 33 per cent the previous year. This means the company is paying more claims from revenue earned.

Insurance companies in Africa’s largest economy are operating in an environment where consumers have lost appetite for buying a cover due to weak purchasing power caused by a harsh and unpredictability macro environment.

Insurance companies are forced to soften their rates and adjustment risks in order to encourage some consumers grasping for breath as a result of economic downturn.

Insurance business is usually the most hit when there is economic recession,” said Mayowa Adeduro, managing director of Anchor Insurance Plc.

Nigeria’s economy contracted by 2.10 percent in the second quarter, according to data from the NBS. The International Monetary Fund (IMF) forecasts that the GDP will shrink by 1.70 percent by end of the year, the country’s worst recession in 25 years.

Inflation has risen to 18.30 percent in October, the highest in 11 years, according to the National Bureau of Statistics (NBS), which leaves consumers with very little to buy a policy.

Despite the aforementioned challenges, the future of Nigeria’s insurance sector is bright as Africa Reinsurance pulse, a survey agency, in a recent report, launched at the 21st African Reinsurance forum in Dakar Senegal, said that the continent’s market is expected to benefit from strong underlying growth driven by an expansion of its primary markets.

The continent’s reinsurance market hits $64 billion dollars.

Africa pulse report also stated that the market’s growth will be based on abundance of natural resources, the need for infrastructural investment, emergence of an expanding middle class and a young and growing population.

Nigeria has a population of 180 million people with the potentials for a robust and affluent middle class if the economy rebounds to growth.

Early this year, SUNU Assurance Group (a Franco-phone African Insurance Group) h acquired 60 per cent equity of Equity Assurance plc.

This arrangement puts SUNU Assurance as the majority Shareholder of Equity Assurance plc with 60 per cent ownership while the existing shareholders have collapsed their ownership to 40 per cent.