Standard Alliance Plc reported a 98.49 percent slump in profit, worsening the pains of an insurer that is struggling with recurring deteriorating revenue.
For the year ended December 2018, Standard Alliance’s net income reduced to N24.80 million from N270.76 million the previous year.
Gross premium income (GPI) fell by 27.98 percent to N3.94 billion in 2018 as against N3.23 billion as at December 2018; net premium income dipped by 20.17 percent to N3.60 billion from N4.51 billion as at December 2017.
Analysts that spoke with MoneyCentral said the Nigerian insurer is not liquid enough to invest in market penetrating products and financial assets that would have helped accelerate demand for premium or earned interest income.
The coronavirus pandemic that ravaged economies across the globe is taking a toll on the Nigerian economy, and the insurance sector is not spared the pang of the crisis.
Also, decline in yields on treasury instrument on the back of stringent policies by the central banks could pressure future earnings; that’s double whammy for companies that are unable to deliver higher return to shareholders in form of share appreciation and bumper dividend.
Insurers depend on yields on invested funds to complement underwriting performance especially in the face of unfavorable underwriting conditions.
Analysts say lower demand and investment returns, a significant deterioration in the credit quality of fixed income securities and increased mortality rates from the virus could pressure earnings in the life segment while a rise in COVID-19 related claims, premium rebates and lower interest rates could affect non-life.
With negative retained earnings of N13.13 billion, Standard Alliance needs capital injection so that it can meet the new minimum paid up capital set by the National Insurance Commission (NAICOM).
According to the new rules, Life insurance with existing minimum paid-up capital of N2 billion must raise the capital to N4 billion to meet the first phase deadline; and then to N8 billion by the second phase expiring on September 30th of 2021.
General insurance business class that runs on N3 billion capital must raise the capital to N5 billion by the end of 2020 and meet the final deadline of N10 billion by the end of Q3, 2021.
Also, Composite class of insurance business which currently runs on N5 billion minimum paid-up capital must jack up the capital base to N9 billion to fulfill the first phase demand of the segmentation by December 31st, 2020 and later increase the capital to N18 billion the end of September, 2020.
The COVID-19 crisis forced NAICOM to postponed the recapitalization date.