Despite a challenging operating environment, Consolidated Hallmark Insurance Plc has posted record profit, thanks to impairment write backs and revenue growth as the insurer has developed its operating and technological capabilities that meet customers’ expectations.
For the first three months through March 2o22, Consolidated Hallmark’s net income increased by 29.29 percent to N441.90 million from N291.45 million as at March 2021.
The growth in profit was significantly driven by a N120 million write back that helped make up for a deteriorating underwriting results caused by mounting obligations, spiraling expense ratio.
The combined ratio deteriorated to 114.88 percent in March 2022 from 93.42 percent the previous year, according to MoneyCentral calculations.
A reduction in combined ratio resulted in negative real underwriting results of N368.61 million as at March 2022.
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.
Even if the combined ratio is above 100 percent, a company can potentially still be profitable because the ratio does not include investment income.
Consolidated Hallmark Insurance paid N1.18 billion in claims to policyholders, which is 69.02 percent higher than 2021’s N698.12 million.
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Claims ratio increased to 43.05 percent in the period under review from 30.97 percent the previous year, according to MoneyCentral calculations.
The insurer spent more on underwriting and management expenses to generate premium income as expense ratio moved to 71.83 percent in the period under review from 62.45 percent the previous year.
Insurers in Africa’s largest economy have seen a spike in operating expenses as inflationary pressures and foreign currency volatility balloons the replacement cost of assets.
Also, the energy crisis due to the war in East Europe has been significantly responsible for the sky-high price of diesel oil insurers use to run generator plants at head offices and branch offices across the country.
The headline inflation climbed further by 90bps to settle at 16.8 percent year on year (y/y) in Apr-22, from the previous print of 15.9 percent y/y in Mar-22, which is 12bps higher than our forecast of 16.7 percent, according to data from the National Bureau of Statistics (NBS).
The company said it is better prepared to meet the challenges of the future as it sees more Nigerians begin to accept insurance as a prudent means of protecting themselves against existing and emerging risks.
Out of the about 100 million adult population in Nigeria, a 2018 survey by the Chartered Insurance Institute of Nigeria (CIIN) revealed that about 86.6 million Nigerians do not have any form of insurance cover.
The fundamental reasons for the abysmally low coverage stems from lack of trust for the claims collection process, weak economy, lack of awareness on the usefulness of insurance, and poor regulations.
While the insurer is reeling from deteriorating underwriting performance, it was able to deliver double digit growth
Further, the financial statement of Consolidated Hallmark shows gross premium income (GPI) was up 14.59 percent to N3.69 billion in March 2022 from N3.22 billion the previous year.
Net premium income (NPI) was up 15.11 percent to N2.59 billion in the period under review from N2.25 billion the previous year.