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Friday, March 31, 2023

Mutual Benefit Returns to Profitability as Combined Ratio Improves

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Mutual Benefit Assurance Plc is profitable again as the insurer is receiving more from premium than it is paying out in claims, which is why there has been an improvement in the combined ratio.

It is important to note that Mutual Benefit has the largest expansion in underwriting income among the largest listed firms, and a profit position means it is poised to pay dividends to shareholders who have invested in the entity in the expectation of earning a return on their investment.

For the first nine months through September 2022, Mutual Benefit posted a profit after tax (PAT) of N3.60 billion from a loss of N3.46 billion as at September 2021.

The stellar performance was also underpinned by a reduction in net fair value loss on financial securities due to a rise in interest rates that led to rising bond yields.

The composite insurer saw underwriting profit increase by 10.88 percent to N6.11 billion in the period under period from N5.51 billion the previous year.

The improvement in underwriting conditions amid tough and unpredictable macroeconomic conditions validates the focus and market penetration strategies of the owners of the business.

Combined ratio improved to 90.70 percent in September 2022 from 92.23 percent as at September 2021.

Expense ratio reduced to 48.45 percent in the period under review from 51.05 percent the previous year.

The company said continuous cost control measures, improved service delivery as well as increased market penetration via digital channels had played huge roles in the success of the five-year plan.

The company is on a solid footing as it has met the recapitalisation by NAICOM, and it has the financial strength to pay claims to policyholders.

It paid N9.20 billion in claims as at September 2022, which is 28.81 percent higher than 2021’s N7.15 billion.

Claims ratio increased to 42.24 percent in the period under review from 41.17 percent the previous year.

The management of the company said that they are committed to further deepening retail insurance business in the country having occupied the lead position over the years.

Of course, analysts see more opportunity in the retail end of the business as there are more people in the informal sector who do not have an insurance cover.

The sector continues to lag its peers in terms of penetration which stood at 0.5% compared with South Africa (12.9%), Kenya (2.8%), Angola (0.8%) and Egypt (0.6%) while density at $6.2 also remains weak compared to South Africa ($762.5), Kenya ($40.5), Angola ($30.5) and Egypt ($22.8).

Mutual Benefit’s gross premium income (GPI) was up 25.34 percent to N24.93 billion in September 2022 from N19.89 billion as at September 2021.

Net premium income (NPI) increased by 25.51 percent to N21.79 billion in September 2022 from N17.36 billion the previous year.

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