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Wednesday, November 30, 2022

Disposal of Significant Investment Compounds Guinea Insurance Woes as Losses Pile

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A loss on disposal of significant investment has tipped Guinea insurance Plc into a negative territory, compounding the woes of an insurer reeling from recurring losses over the past few years.

The insurer posted a loss after tax of N752.04 million as at December 2019 compared to a loss of N190.19 million as at December 2018.

A cursory look at the financial statement of the company showed the loss was due to a deficit on disposal of a pertinent asset to a tune of N645 million, as rising expenses are responsible for deteriorating combined ratios.

Information glimpsed from the books of the insurer showed investment property it acquired a few years ago for N1.82 billion was sold for N1.10 billion, a misguided strategic decision.

A property located at 23, Idowu Martins Street off Adeola Odeku, V.ictoria Island, Lagos, Ubosi Eleh, was disposed of for N1.12 billion. Another asset, situated at 1, Nnamdi Azikwe Road, Lagos Island, Lagos, was sold at N625,000.

Guinea Insurance has negative retained earnings of N1.75 billion, which means its shareholders will not receive dividend because the law allows companies to reward their owners from distributable profit.

The company is spending its way into the future as management expenses of N868.61 million is 96.21 percent of net premium income of N902.47 million.

Little wonder underwriting results continues to deteriorate as combined ratio rose to 156.01 percent in December 2019 from 149.95 as at December 2018.

A spiraling combined ratio means the company is earnings less than it is spending on claims and other expenses. A ratio higher than 100 percent indicates an insurer is not efficient and profitable from underwriting activities perspective.

Net premium income was flat at N902.47 million as at December 2020 while gross premium written increased by a mere 2.04 percent to N1.29 billion in the period under review.

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