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Regency Alliance Records Strong Earnings Amid Unfavorable Underwriting Environment

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Regency Alliance Plc has reported a solid quarter of earnings for  Q1 2021, as it delivered 95.57 percent growth in profit, despite inflationary pressures, currency devaluation, and deteriorating consumer purchasing power.

For the first three months through March 2021, Regency Alliance’s net income increased to N427.88 million from N209.34 million the previous year.

The strong growth at the bottom line (profit) is largely driven by rapid uptick in revenue, which validates the company’s innovative and market penetrating products that continues to allure customers.

Also, the cost control measure put in place by the management and board of directors has paid off as management expenses reduced, which led to an improvement in combined ratio.

Regency Alliance’s combined ratio improved to 78.97 percent in the period under review from 84.43 percent the previous year, according to MoneyCentral’s calculations.

The combined ratio measures the money flowing out of an insurance company in the form of dividends, expenses, and losses. Losses indicate the insurer’s discipline in underwriting policies.

A ratio below 100 percent indicates that the company is making an underwriting profit, while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.

Interestingly, Regency Alliance has an efficient underwriting policy even amid an unfavorable underwriting environment as the insurer saw underwriting profit increase by 16.32 percent to N876.51 million in March 2021 from N753.52 million           as at March 2020.

Clem Baiye, Chairman Regency Alliance, said that the company’s fundamentals remained strong and that it was well positioned to meet the new minimum capital requirements of the National Insurance Commission.

NAICOM, the body that regulates insurance activities in Nigeria, had earlier extended the deadline for compliance with insurance industry’s recapitalisation due to the economic disruption caused by COVID-19.

Regency Alliance has shareholders’ funds of N6.97 billion as at March 2021, that represents a 7.21 percent from 2020’s N6.47 billion; total assets were down slightly 1.92 percent to N12.50 billion in the period from N12.74 billion the previous year.

Baiyi said the company will take advantage of the gradual pick-up in economic activities as vaccines are being rolled out by governments of various countries.

The coronavirus pandemic that disrupted business activities across the globe tipped Nigeria into its second recession in 2 years as energy prices plummeted.

However, a gradual relaxation of the lockdown measures imposed by the government to curb the spread of the virus saw a rebound in crude oil price and pent up demand that helped Nigeria exit recession in the third quarter of 2020.

Nigeria’s Gross Domestic Product (GDP) grew by 0.51 percent (year-on-year) in real terms in the first quarter of 2021, marking two consecutive quarters of growth following the negative growth rates recorded in the second and third quarters of 2020.

With rising unemployment rate and inflationary pressures stealing workers’ wages, a lot of people will not be taking insurance covers.

Presenting its six-monthly update on development in Africa’s most populous country, The World Bank gave a GDP growth forecast for Nigeria of 1.9 percent in 2021 and 2.1 percent in 2022, compared with 3.4 percent this year and 4.0 percent next year for sub-Saharan Africa.

The Nigerian insurer is committed to meeting the needs of its insured by ensuring their claims were promptly settled.

Net claims expenses increased by 21.87 percent to N470.30 million as at March 2021 from N385.89 million the previous year; loss ratio moved to 30.35 percent to March 2021 from 28.51 percent the previous year.

Interestingly the insurer is spending less on operating cost to generate premium income as management expense ratio fell to 33.42 percent in March 2021 from 37.17 percent the previous year.

Further analysis of Regency Alliance shows gross premium income (GPI) was up 9.68 percent to N2.04 billion in March 2021 from N1.86 billion as at March 2020; net premium income followed the same growth trajectory as it was up 14.46 percent to N1.54 billion in the period under review from N1.35 billion the previous year.

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