Niger Insurance: What tomorrow will bring

20 July, 2008 02:00:00 Kirk Leigh

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In the last financial year, which ended December 2007, the company spawned gross premiums of N2.49 billion to make a better impression over the previous year when it garnered 19 percent less at N2.08 billion.

This is only a small picture of the company’s ability to earn premiums, enough of which it has attracted in the last five years.

A study by Vetiva Research notes that the company "earns adequate premiums every year to carry on its underwriting activities, this can be further accentuated by the fact that the company’s combined ratio (underwriting expense ratio and investment ratio) has averaged 42 percent over the last five years."

It is possible that the growing asset base of the company helped galvanise the gross premium level. Fixed Assets, which includes brancehes for doing business, took a lift by more than a quarter to N13 billion from N11 billion.

The effect on the bottom line of this spruce return was, however, marginal with pre-tax profit notching a marginal 11 percent. It grew from N750.79 million to N835.28 million. And as was expected, net profit followed the trend, rising 11.4 percent to N657 million from N589.59 million.

The slow-paced growth betrays an ability to keep costs under wraps, especially as pre-tax margin slumped to 33.6 percent from 36 percent. This means that the company is making less from gross premiums towards pre-tax profit.

This backslide was also apparent in how much the insurance company made towards net profit from gross premiums. It inched from 28.3 percent to 26.4 percent. What this means is that for every naira of gross premium, the company is only able to make 26 kobo as net profit where previously it made 28 kobo.

Claims paid by the company at N272.23 million is about a quarter more than what it paid the year before, which was N221.715 million.

"Our policy on claims payment administration is that we must always put smiles on the faces of the unfortunate insureds who suffer losses.

"We have a very smooth claims payment mechanism which ensures that within a very reasonable time, all the genuine claims were attended to the cheques sent to clients," managing dirfector, Justus Uranta had volunteered.

To be able to adequately meet up with claims obligation, an insurance company should be able to significantly improve bottom line, which in turn is used to boost reserve.

Perhaps the lean profit level is the reason general reserve for Niger insurance is not particularly fleet-footed, rising only 13 percent.

The other way the company could go is to rely on returns from investments to hedge against claims payments. But against the fact that the company invested less in 2007 by 5.3 percent, it could mean that it is trying to strike a balance between using earnings that are risk-sensitive and profit which is relatively stable.

But the company’s investment profile seems to suggest preference for quoted investments which took a sharp swing upwards to N2 billion from a mere N733.5 million, a 175 percent growth. It could indicate the company’s belief in the capital market as a veritable investment outlet.

The company played down on government securities this year, putting money in only half a million worth of securities. But government securities are the most secure there is and they are more liquid if they are in the form of treasury bills.

Whatever the case, income from fixed investment grew by a third ebbing at N424.97 billion from N152.71 billion.

At N106.74 million, the company is not expecting much from interest over last year’s, which was N100 million.

Stock performance

Niger Insurance plc’s allocation of the total of N843.174 million to shareholders as dividends and bonus stand as the highest that any insurance firm has given out in one-swoop.

Yet, the managing director and chief executive officer of the company, Justus Clinton Uranta, said last week that for Niger Insurance, the best is yet to come.

He had told newsmen that Niger is on the crest towards raising its share capital to an all-time high of N8 billion. This, the company intends to accomplish by the first half of next year.

It was therefore not surprising that the shareholders, who after tasting the juicy 2006 dividend and bonuses were quick at approving the proposal for an increase in the company’s authorised capital, even as the board was given the mandate to explore every available vehicles for the realization of the set target.

With N5 billion already in the box as paid up capital, Uranta had revealed that Niger Insurance intends to raise the difference through the revaluation of its assets as well as the capital market, from which no less than one billion naira would be mopped up.

"We view the future with optimism and have re-positioned the company to take full advantage of the emerging opportunities. It is my pleasure to report to you that the proceeds from the concluded rights issue are being utilised in accordance with the undertaking in the rights circular", chairman of the company, Zakariya’u had informed.

All eyes seems to have been on the insurance stocks owing to the sectors post-consolidation prospects. The market prices of insurance stocks were typically within the range of 95 kobo (ACEN Insurance plc) to N7.70 (WAPIC plc) as at March 29, 2007 about a month after the February 28 2007 consolidation hurdle date.

However, the story is quite different now with the list priced insurance sector stock as at today, Goldlink Insurance plc closing at N2.48, while the the market price of insurance stocks today is in the range of N2.48 (Goldlink) to N12.70 (WAPIC). From this statistics extract, all share investors that have maintained their position in any particular stocks of the insurance sector for at least a period of eleven months now would have made a minimum absolute share price appreciation of N1.53 and a maximum of about N5.00 on the average, as of end of today’s trading, on each unit shareholding.

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