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Allianz Nigeria has been recording recurring losses due to rising operating expenses emblematic of unfavorable underwriting conditions as the insurer is steadfast in honoring obligation to policyholders.
Higher expense ratio prevents the company from translating top line (revenue) impressive performance into bottom line (profit)growth, signaling management and board of directors have to intensify on cost control strategy needed to put the entity on the path of profitability.
For the year ended December 2019 (its latest available financial statement), Allianz Nigeria posted a loss of N3.74 billion from a loss of N888.54 million the previous year.
The company spends more on operating expenses (underwriting plus management) expenses in generating premium income.
For instance, total operating expenses of N6.01 billion in 1.10 times revenue. Total expense ratio stood at 110.33 percent in December 2019 from 107.19 percent as at December 2018, according to MoneyCentral calculations.
The combined ratio increased to 176.34 percent in December 2019 from 166.78 percent as at December 2018.
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.
In the insurance parlance, the fundamental obligation of a firm to its customers is the payment of claims as at when due, and Allianz Nigeria has not reneged on such contracts.
The insurer paid N3.60 billion in dividend in 2019, and that is 62.89 percent higher than 2019’s N2.76 billion.
Claims ratio increased to 66.01 percent in the period under review from 59.90 percent as at December 2020.
In the first half of 2021, Allianz Nigeria paid N1.80 billion claims, demonstrating its commitment and resilience to customers even in tough times due to the effects of the COVID-19 pandemic on the economy.
The managing director of Allianz Nigeria Adeolu Adewumi-Zer reassured the customers of the company’s obligations to settle claims and promised to focus on the fulfilment of such obligations to maintain trust and uphold its status as a top insurance brand in the world.
As risk-bearers, claims settlement is the core of any insurance business, and we are fully awake to our obligations to all stakeholders,’’ said Zer.
Insurers in Africa’s largest economy are sitting on a pile of claims brought on by inflationary pressures and weak currency.
However, there are concerns that some may not be able to meet future obligations due to deteriorating premium income that casts a doubt on their ability to continue as a going concern.
Interestingly, some small sector players’ claims expenses exceed revenue, which exposes them to possible takeover by well capitalized firms as the regulator has hiked the minimum capital requirements for operators in the industry.
The largest insurers collectively incurred N165.55 billion in claims expenses in 2021, which is 17.97 percent 2020’s N140.33 billion, according to data gathered by MoneyCentral.
Allianz Nigeria’s innovative products are contributing to revenue growth while at the same making an inroad into the market.
Gross premium written (GPW)’s increased by 27.40 percent to N12.74 billion in December 2019 from N10 billion as at December 2018. Gross premium was up 15.58 percent to N11.27 million in the period under review from N9.75 billion the previous year.
Net premium income increased by 49.90 percent to N5.45 billion in December 2019 from N3.71 billion the previous year.
Allianz Nigeria has announced the launch of a family protection plan that will help pay for the cost of funeral arrangements, thus forming an important part of protection for low-income workers, following the securement of all requirements of the local insurance regulator.
This product is the outcome of months of extensive market research into current and prospective customer demand in the local market, especially in the wake of the recovery from the global disruption of Covid-19.