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Friday, March 24, 2023

Mutual Benefit Returns to Profit on Rise in Interest Rate

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Mutual Benefit Assurance Plc has returned to the path of profitability, thanks to a rise in interest income on fixed asset income as the insurer has maintained efficient underwriting results over a decade.

For the first three months through March 2022, Mutual Benefit posted a profit after tax of N1.65 billion from a loss of N1.97 billion.

The growth as the bottom line (profit) was largely driven by investment returns as investment income spiked by 55.26 percent to N419.31 million in March 2022 from N270.07 million the previous year.

The insurer posted net value gain on asset at fair value of N223.02 million from a loss of N4.71 billion in 2021 as there were lower valuations for life and annuity funds liabilities.

In a high yield environment, Insurers pack their money in investment securities with a view to enjoying juicy yields that guarantee high returns that help compensate for unfavorable underwriting environments.

The Monetary Policy Committee of the Central Bank of Nigeria has unanimously voted to increase the benchmark interest rate (monetary policy rate) to 14% from 13%, being the second hawkish move by the apex bank in 2022 following the rising rate of inflation.

There was also improvement in premium income that validates the uptick in business activities as the insurer’s innovative products are making an inroad into the Nigerian market.

Gross premium income (GPI) was up 35.38 percent to N10.98 billion in March 2022 from N8.11 billion as at March 2021.

Net premium income increased by 24.12 percent to N6.76 billion in the period under review from N5.45 billion the previous year.

Segment analysis shows gross premium written from Life Business was up 55.62 percent to N4.84 billion March 2022 from N3.11 billion as at March 2021.

Gross premium written from Non-Life Business increased by 22.80 percent to N6.14 billion in the period under review from N5 billion the previous year.

Claims expenses spiked by 85.40 percent to N2.50 billion in the period under review , as higher inflation balloons the replacement cost of assets.

Nigeria’s inflation rate rose to 19.64 percent in July, according to the National Bureau of Statistics (NBS), the highest level since September 2005.

The insurer’s combined ratio stood at 89.15 percent, which is lower than the 100 percent bench-mark.

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