Despite the challenging conditions in the insurance industry in 2020, Prestige Assurance Plc was able to underwrite healthy business volumes that translated to earnings growth.
The company maintained steady growth at the top line as gross premium income spiked by 13.39 percent to N6.70 billion in December 2020 from N5.92 billion as at December 2019.
Net premium income was up 17.23 percent to N3.47 billion as at December 2020 from N2.96 billion as at December 2019.
The growth in revenue was supported by an uptick in Life segment and the company said it was looking for more effective ways to diversify its portfolio mix that would eventually protect the quality of its business.
As a result of a low yield environment and dovish stance of the central bank that left interest rate unchanged its last Monetary Policy meeting, investment income reduced by 11.11 percent to N624.82 million in the period under review as against N702.85 million the previous year.
Despite the deteriorating investment returns and spiraling claims expenses, Prestige Assurance net income surged by 50.44 percent to N649.66 million in the period under review as against N431.81 billion the previous year.
Return on average equity (ROAE) moved to 5.30 percent as at December 2020 from 5.10 percent the previous year, according to MoneyCentral calculations.
However, the company needs to curb deteriorating underwriting conditions because total expenses are gradually exceeding revenue, as the combined ratio is above the 100 percent threshold.
The company is paying out more in claims than it earns from premium income as combined ratio hit 119.59 percent as at December 2020, resulting in negative real underwriting results of N659.13 million.
The combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations.
A ratio below 100 percent indicates that the company is making an underwriting profit, while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.
Prestige Assurance’s total claims stood at N1.62 billion as of December 2020, which represents a 13.20 percent uptick from 2019’s N1.43 billion.
The company had said it was set to raise N6.82bn through the issue of 13,635,796,006 shares at N.50 kobo per share, in a bid to meet regulatory requirements and enhance its business operation and reach.