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Listed Insurers Claims Expense Fall Despite Covid-19 Shocks

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Despite the impacts of the Covid-19 pandemic, listed insurers in Africa’s largest economy earned more from premium income than they paid out in claims.

Average industry loss ratio fell to 39.53 percent in June 2020, from 47.91 percent the previous year, according to data compiled by MoneyCentral.

What this means is that insurers spent N39.53 for every N100 that they generated in premium income.

Despite currency devaluation and unpredictable macroeconomic environment, the listed insurers’ combined claims expenses were up just 0.28 percent to N48.22 billion as at June 2020.

That compares with 12.94 percent jump in 2019; (+14.44 percent), 2018; (78.84 percent), 2017, and 37.54 percent in 2016.

However, analysts have warned that the coronavirus pandemic that paralyzed economic activities could lead to mounting obligations in the last quarter of the year.

They added that the fallout from the COVID-19 outbreak includes a surge in health, travel and business interruption claims, pressure on sales from reduced business activity, and less use of face-to-face channels.

A reliable source told MoneyCentral that some companies are laying off staff as a result of the Covid-19 headwinds, and that these staff will have to go and make claims, a situation that could undermine the solvency ratio of companies.

According to the Gross Domestic Product (GDP) Report by The National Bureau of Statistics (NBS), the insurance sector contracted by 28.15 per cent in the second quarter of the year.

In terms of reach, the Nigerian insurance industry continues to lag peers with low insurance penetration (Gross Premium Written/GDP) of 0.34% in 2019 (2018: 0.33%) compared with South Africa (13.4%), Morocco (3.9%), Kenya (2.3%) and Egypt (0.6%), according to data glimpsed from Afrinvest Securities.

Further analysis of the financial statement of listed insurers shows that AXA Mansard’s loss ratio fell to 62.80 percent in the period under review from 70.70 percent the previous year; while net income surged by 154.42 percent to N3.60 billion as at June 2020.

Wapic Insurance’s claims ratio fell to 40.30 percent in June 2020 from 45.30 percent the previous year. Claims expenses dipped by 15.39 percent to N1.47 billion as at June 2020.

AIICO Insurance, the largest listed insurer in the country, saw loss ratio reduce to 56.10 percent in the period under review from 59.80 percent the previous year.

Royal Exchange Insurance’s claims ratio reduced to 25.10 percent in the period under review as against 50.20 percent the previous year while total claims expenses declined by 52.60 percent to N1.03 billion as at June 2020.

Consolidated Hallmark Insurance saw loss ratio reduce to 36.20 percent in the period under review from 55.55 percent the previous year while claims expenses fell by 35.40 percent to N1.05 billion as at June 2020.

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