Veritas Assurance Plc has incurred more expenses in generating premium income, an inefficiency that has resulted in deteriorating underwriting performance.
The insurer’s combined ratio worsened to 414.05 percent in March 2021 from 41.34 percent the previous year, according to MoneyCentral calculations.
The combined ratio is typically expressed as a percentage. 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.
The deteriorating results stems from management and underwriting expenses growing much faster than increases in revenue.
Total expenses of N1.06 billion as at March 2022 is 3.83 times net premium income, which means the insurer has to formulate policies that will propel revenues.
Total expense ratio rose to 383.24 percent in March 2022 from 38.08 percent the previous year.
Despite the spiraling combined ratio, Veritas still posted a profit after tax of N126.17 billion as at March 2022, which is 68 percent lower than 2021’s N394.32 million.
Shareholders of Veritas Assurance were not paid a dividend last year because the insurer has a negative retained earnings of N1.18 billion as the law prohibits financial institutions from paying out dividends from accumulated losses.
However, the directors of the company allayed fears of shareholders as it said the company was on a continuing path of profitability going by the risk management structures put in place, adding that within the next two to three years, the owners would be assured of dividends.
The company said it was being cautious in delving into some very risky business in order to end up paying claims with shareholders’ funds.
Gross premium income dipped by 15.26 percent to N1.59 billion in the period under review from N 1.88 billion the previous year.
The decline in gross premium income was largely driven by a slump in the Agric business, but the company is sanguine that the investments made so far will have a positive impact on the segment.
Net premium income fell by 82.08 percent to N276.84 million as at March 2022 from N1.54 billion the previous year.
The drop in net premium earned was due to 289.08 percent surge in reinsurance expenses to N1.31 billion.