AIICO Insurance Plc has sufficient cash flow to pay bills, repay its debt, and absorb claims, which validates the insurer getting certificate of non-indebtedness from the Pension Transitional Arrangement Directorate (PTAD).
The insurer’s solvency margin increased to 351 percent in December 2020 from 263.50 percent as at December 2019, according to MoneyCentral calculations.
Solvency is the ability of a company to meet its long-term debts and financial obligations. Solvency can be an important measure of financial health, since it’s one way of demonstrating a company’s ability to manage its operations into the foreseeable future.
In India, the minimum solvency margin for life insurance companies stands at 150 percent.
The solvency margin is to ensure that companies have enough capital or funds to cover unexpected claims due to unexpected and unforeseen claims expenses.
It is worth repeating that AIICO Insurance has been cleared of all liabilities by the regulator.
The Pension Transitional Arrangement Directorate (PTAD) has issued a certificate of non-indebtedness to AIICO Insurance Plc, a move that clears the underwriter of any claim of non-remittance of pension assets.
“In acknowledgement of the payments made by AIICO Insurance Plc, PTAD has issued a certificate of non-indebtedness to AIICO Insurance Plc and will update relevant institutions of this development in due course,” said Chioma Ejikeme, executive secretary of PTAD.
“I call on other insurance underwriters holding on to Legacy Funds and Assets to do the needful as a matter of urgency. This will enable the Directorate to meet its obligation to pensioners,” said Ejikeme.
A legacy asset is an asset that has remained on a company’s balance sheet for a long period of time and has since become obsolete or has lost nearly all of it’s initial value. In fact, legacy assets run the risk of becoming a liability for the company holding them, as they may incur storage, repair, or maintenance costs.
AIICO Insurance emerged the largest insurer by revenue, displacing LeadWay Assurance Limited, surmounting the coronavirus headwinds and the low yield environment.
The stellar performance was underpinned by excellent risk management strategy and the introduction of innovative products that are being accepted by customers.
It posted gross premium income of N60.70 billion as at December 2020, and that compares with Custodian Investment Plc’s revenue of N58.14 billion; AXA Mansard, (N45.15 billion); NEM Insurance, (20.97 billion); Wapic Insurance (N17.45 billion); Cornerstone Insurance, (N15.86).
AIICO Insurance started 2021 impressively, posting N27.69 billion underwriting profit in March, from a loss position of N131.74 million asa at March 2020.
Analysts are optimistic that the insurer will continue to overcome valuation losses from the life and annuity funds which were pressuring underwriting performance and profitability.
It has a shareholders’ fund of N34.73 billion as at March 2020, which is higher than the N18 billion regulatory minimum capital requirement by the National Insurance Commission (NAICOM).
The recapitalization process also resulted in ownership dilution as AIICO’s share outstanding has risen to 20.6bn units from 6.9bn units in 2019.