Universal Insurance posts N307.036m loss on rising claims expenses
Universal Insurance Nigeria Plc third quarter results have fallen short of analysts’ expectations as rising claims expenses tipped the underwriting firm into loss position.
For the first nine months through September 2017, the underwriting firm recorded a loss after tax of N307.06 million from N91.90 million as at September 2016.
The loss was due to rising claims expenses as the company continues to honour obligation towards policy holders.
Claims expenses surged by 286.97 percent to N360.95 million in September 2017 from N93.39 million the previous year. Claims ratios increased to 70.54 percent in the period as against 25.38 percent the previous year.
This means the company has spent more money on claims from each unit of premium income generated.
Universal insurance’s underwriting profit dipped by 54.71 percent to N108.25 million in September 2017 from N239.02 million as at September 2016.
While the firm recorded a loss in the period under review, it is efficient as combined ratios (CR) OF 82.05 percent are below the threshold.
The CR is calculated by taking the sum of incurred losses and expenses and then dividing them by earned premium.
The ratio is typically expressed as a percentage. A ratio below 100 percent indicates that the company is making underwriting profit while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.
Experts have called on insurers in Africa’s most populous and largest economy to recapitalize as their capital bases are too weak to take on more risk and compete with peers on a global arena.
The cumulative shareholders fund of the 43 insurance firms that have released 2016 full year financial results on the website of the National Insurance Commission (NAICOM) stood at N306.90 billion, which is lower than the N767.69 billion of Tier one lender, Zenith Bank.
Also, the total market capitalization of the most liquid 15 insurance firms stood at N103.25 billion, which is lower than the N425.50 billion market cap of Tier 2 lender, Stanbic IBTC Holdings.
Analysts are of the view that strong capital bases would give insurers the leeway to take on more risk and compete with their peers on the global arena.
Insurers with inadequate shareholders fund are preparing to raise addition capital in preparation for the next phase of the implementation of the Risk Based Supervision by the NAICOM.
Mutual Benefit Assurance Plc plans to raise additional capital of N4 billion via rights issue as it seeks to shore up capital.
Shareholders of Wapic Insurance Plc have approved the company’s plan to raise additional capital in the sum of N10 billion.
“The company is approaching its shareholders at this time to seek approval to raise additional capital as a proactive step towards getting the company ready and set for a much-anticipated regulatory increase in the minimum capital of insurance companies.” said Aigboje Aig-Imoukhuede, Chairman of Wapic Insurance.
Universal Insurance’s gross premium written (GPW) increased by 47.54 perecent to N534.90 million in September 2017 from N362.54 million the previous year.
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