14 Firms paid N27.02 bln claims in HY

14 Firms paid N27.02 bln claims in HY

Insurance firms in the country are steadfast in meeting obligations to policyholders as total claims paid in the second quarter on the back of an economic downturn

The percentage of money paid out to policy holders to revenue generated surged for most firms as an unstable the exchange rate movement has pushed up the premium on claims expenses.

The cumulative net claims of the 14 most liquid insurers that have released half-year results increased by 14.72 percent to N27.02 billion from N24.17 billion as at June 2016.

Combined claims ratio otherwise known as loss ratio of the 14 firms move to 53.49 percent in June 2017 from 51.11 percent the previous year. This means they are paying N53 on every N100 earned in revenue.

Analysts attribute increased claims to the movement in the exchange rate that jerks up insurance claims as most obligations were undertaken when the exchange rate was low.

Drilling down the figure shows Aiico Insurance’s net claims expenses increased by 26 percent to N8.87 billion in the period under review from N7.88 billion the previous year. Loss ratios moved to 95.07 percent in June 2017 from 67.95 percent the previous year.

 

Table 1

 

Insurers’ HY 17 Claims expenses for Second Quarter

  2017 (N’m) 2016 (N’m) %Change
AIICO                8,872.00                7,040.00          0.26
Mansard                4,552.00                3,649.00          0.25
Wapic                  1,627.00        1,349,056.00        (1.00)
NEM                    365.00                    206.00          0.77
Cornerstone                2,262.00                1,715.00          0.32
Lasaco                1,294.00                1,314.00        (0.02)
Law Union & Rock                    332.00                    449.00        (0.26)
Continental Re                3,518.00                5,290.00        (0.33)
Staco                    592.00                    272.00          1.18
Standard Alliance                    698.00                    906.00        (0.23)
Prestige Insurance                    176.00                    100.00          0.76
Linkage Assurance                    559.00                 (168.00)        (4.33)
Niger Insurance                2,170.00                1,208.00          0.80

Source: Company Financials; BusinessDay Analysis

Cornerstone Insurance’s net claims expenses spiked by 32 percent to N2.68 billion in June 2017 as against N1.71 billion as at June 2016; while loss ratio rose to 80.18 percent in June 2017 from 66.79 percent the previous year.

AXA Mansard Insurance net claims expenses were up 25 percent to N4.55 billion in June 2017 from N3.65 billion the previous year; while loss ratio increased to 70.54 percent in June 2017 from 66.54 percent the previous year.

Niger Insurance’s net claims expenses increased by 80 percent to N2.17 billion in June 2017 as against N1.20 billion the previous year; while loss ratio rose to 50 percent in June 2017 from 40.95 percent the previous year.

Wapic Insurance’s net claims expenses rose by 21 percent to N1.62 billion in June 2017 from N1.35 billion as at June 2016; while loss ratios fell to 58.20 percent in June 2017 from 58.48 percent the previous year.

There light at the end of the tunnel for insurers as the new Investors’ and Exporter policy introduced by the central bank and the liberalization of the foreign exchange market has eased the flow of dollars in the foreign exchange market.

The exchange that traded at N520/$ now goes to between N360 and N368 per dollar.

In the second quarter of 2017, the nation’s Gross Domestic Product (GDP) grew by 0.55 percent (year-on-year) in real terms, indicating the emergence of the economy from recession after five consecutive quarters of contraction since Q1 2016.

The economy shrank by 1.5 percent in 2016 for its first annual contraction as many businesses were unable to
access dollars to import raw materials and equipment.

Investor appetite for equities has increased with the Nigerian Stock Exchange All Share Index (NSEASI) 24.40 percent higher between January and June 2.17, recovering from a 6.20 percent contrction between January and December 2016.

Stakeholders and Industry players concur that Nigeria is out of the recession as there has been an improvement in the purchase of insurance policies.

“I can see a lot of commercial activities and also a lot of improvement in terms of insurance purchase. If we compare the improvement to what we have last year, we can agree with the Federal Government that technically we are out of recession. But it will take some time before people start feeling the positive impact,” said Funmi Babington-Ashaye, the President of Chartered Insurance Institute of Nigeria (CIIN).

Table 2

Insurers’ Claims Ratio for Second Quarter

  2017 2016  
AIICO 95% 68% 40%
Mansard 71% 67% 6%
Wapic 59% 62% -6%
NEM 8% 6% 52%
Cornerstone 80% 67% 20%
Lasaco 63% 94% -33%
Law Union & Rock 27% 35% -21%
Continental Re 32% 50% -35%
Staco 22% 12% 83%
Standard Alliance 26% 39% -34%
Prestige Insurance 26% 20% 32%
Linkage Assurance 37% -11% -445%
Niger Insurance 50% 41% 21%

 

Despite the uptick in economic activities and improved insurance activities, the industry has major challenges such as poor regulations, apathy toward insurance and tough operating environment.

The Insurance sectors Gross premium to GDP ratio of 0.4 percent in 2015 was well below that of South Africa (14.7 percent) and Malaysia (4.8 percent).

The Commissioner of Insurance, Mohammed Kari, says there are indications that the insurance industry’s gross written premium for this year could climb over N400 billion as against the N320 billion recorded in 2016.

Some insurers are raising funds from the capital market to strengthening their balance sheet and finance future expansion plans.

Consolidated Hallmark Insurance Plc is set to raise N500 million from the capital market to boost its operations.

According to the firm, the capital to be raised will be used to finance the acquisition of a Life Insurance Company, after the deduction of the estimated Issue costs and expenses of N15,715,429 (representing 3.14 percent of the Issue proceeds), the net issue proceeds of N484,284,571 will be utilized.

 

BALA AUGIE

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