AIICO Insurance Plc, NEM Insurance Plc, Mutual Benefit Assurance, and Regency Assurance are the most efficient and profitable insurers in Africa’s largest economy as they received more in premium income than the claims paid out.
In the insurance parlance, profitability is attained when the revenue exceeds total expenses while contemporaneously meeting obligations to policyholders.
AIICO Insurance recorded a combined ratio of (97.60 percent); Mutual Benefit, (86.18 percent); NEM Insurance, (93.25 percent), and Regency Assurance, (71.35 percent), according to MoneyCentral calculations.
And on the flip side, or the laggards are: AXA Mansard, (108.83 percent); Coronation Insurance, (106.38 percent); Coronation Insurance, (115.86 percent); Lasaco Assurance, (119.95 percent); Consolidated Hallmark ,(110.89 percent); Sovereign Trust Insurance, (105.93 percent); 110.35 Royal Exchange, (110.25 percent); Prestige Assurance, (111.81 percent); Linkage Assurance, (142.28 percent); Guinea Insurance, (166.05 percent),and Veritas, (177.13 percent).
The combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations. 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.
It is worth noting that insurers are beset by inflationary pressures, foreign exchange crisis, and sky-high diesel prices that balloons total operating expenses.
Of course, spiraling inflation widens companies’ liabilities as they are exposed to rising obligations to policyholders on the back of rising replacement costs of assets.
Nigeria’s inflation rate hits 19.64% in July 2022, the highest in 17 years.
The largest insurers posted negative real underwriting results of N3.10 billion in June 2022 from a loss position of N3.31 billion as at June 2021. According to data gathered by MoneyCentral.
However, AIICO, Mutual Benefit, NEM, Regency Assurance, buck the trend as they recorded positive real underwriting results of (N815.52 million); (N1.86 billion); NEM, N830.98 million, and Regency, (404.46 percent).
Analysts prefer the real underwriting results as a measure of efficiency and profitability to underwriting profit because it includes management expenses in its calculations.
Insurers saw cumulative underwriting profit dip by 52.13 percent to N27.71 billion from N57.89 billion as at June 2021.
Analysts at Afrinvest in a latest report seen by MoneyCentral attribute poor underwriting performance to the high base effect witnessed in the corresponding period of last year as sharp rise in fixed income yield resulted in lower valuation for life and annuity fund liability.
The Nigeria 10 year government bond has a 12.797 percent yield as at 2:00 pm on August 20, 2022, according to World Government Bonds.
The policy-setting committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which measures interest rate, from 13 percent to 14 percent to tame rising inflation.