The top 17 public Nigerian insurance companies reported aggregate revenue of N175.10 billion in the first six months of 2021, a year on year increase of about 21.85 percent, according to data gathered by MoneyCentral.
11 firms reported an uptick in revenue and the most notably were Custodian Investment, AIICO Insurance, AXA Mansard, Mutual Benefit, Cornerstone, Lasaco, Prestige Assurance, and Linkage.
Most of the composite ones were able to magnify both life and non-life premium income and there was an improvement in third party vehicle business.
AIICO Insurance saw an 18.44 percent increase in gross premium income to N34.43 billion as at June 2021, while the Life segment, which makes up 71.50 percent of gross premium income, grew by 9.32 percent to N24.62 billion as at June 2021. Life segment was up 52.81 percent to N9.49 billion in the period under review from N6.21 billion the previous year.
Custodian Investment’s gross premium income grew by 22.18 percent to N32.93 billion as at June 2021, and revenue at the Life segment was up spiked by 40.28 percent to N16.85 billion as at June 2021 while Non-Life segment rose by 7.90 percent to N16.25 billion in the period under review from N15.06 billion the previous year.
AXA Mansard’s gross premium income was up 14.03 percent to N25.92 billion as at June 2021 while the Non-Life segment’s revenue was up 33.13 percent to N17.80 billion while Life business rose by 4.31 percent to N5.32 billion.
Mutual Benefit Assurance’s gross premium income spiked by 43.40 percent to N13.50 billion as at June 2021 while Non-Life segment was up 83.05 percent to N9.61 billion as at June 2021. Life business grew by 16.93 percent to N5.72 billion as at June 2021.
The stellar performance at the top line validates the improvement in new levels of business activities after the government relaxed the lockdown measures imposed to curb the spread of a virus that paralyzed economies across the globe.
Nigerian insurers were not insulated from the deadly impact of the pandemic that undermined firms’ operations from sales and processes of insurance policies through claims processing.
Analysts attribute the steady growth in premium income in the last few years to gradual increase in acceptance of insurance at both the formal and informal sectors of the economy.
They added that operators need to pay better attention to genuine claims settlement, as this remains a viable platform to increase insurance penetration and acceptance.
In 2020, Head, Financial Institutions Ratings, Agusto &Co Nigeria, Ayokunle Olubunmi disclosed that 500,000 Nigerians, specifically those in the informal sector, had subscribers to microinsurance policy, despite the challenges facing microinsurance schemes.
“low level of education, developing a low cost operating model, affordability of microinsurance products, availability of staff with the requisite skills, low awareness and trust issues, developing products that meet the customer needs, inadequate data, culture and religious beliefs, negative perception about insurance, bottlenecks in obtaining approval for needed partnerships,” said Olunbumi.
Fitch Ratings, one of the global rating agencies, said Iow income and a lack of understanding of the benefits of life insurance remain the most important obstacles facing life insurers.
According to Fitch, in spite of Nigeria’s large population, only a small proportion purchases life insurance whose premium currently accounts for 41.9 per cent of the overall insurance spending in the country.
The insurance 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).
Policy makers have not been formulating that will help create jobs and reduce poverty as there exists a relationship between economic growth and insurance penetration.
This is because deepening insurance in a country where over 50 percent of a population of 200 million live on less than $1.98 a day is a herculean task, and many companies have been spending money on awareness campaigns that will ensure that their products get to those people in the rural areas.
Interestingly, rising operating and claims expenses have prevented such impressive performance at the top line to translate into bottom line growth as insurers are grappling with deteriorating profit margins.
Notably, the ratio of profit to revenue has been poor, which is they are unable to declare bumper dividends needed to attract more shareholders and achieve share appreciation.
Nigerian insurers have an average industry price-to-book ratio of 0.43x compared with South Africa (1.99x), Egypt (1.65x) and Kenya (0.64x).
It is also worrisome that investment returns have been dwindling on the back of the central bank dovish tone that is responsible for a low yield environment. The significant implication of receding investment income is that future profit will shrink.