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Tuesday, August 9, 2022

AIICO Insurance’s Underwriting Performance Remains Strong as Investment Income Underpins Profit

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Despite lower valuations for life and annuity funds liabilities, AIICO Insurance Plc recorded a solid underwriting performance as the gradual improvement in the yield environment spurred investment income that underpinned profitability.

The largest listed insurer by total asset who has been launching market penetrating products saw net income spike by 51.38 percent to N4.92 billion in June 2022 from N3.25 billion as at June 2021.

Of course, the bottom-line (profit) growth was largely driven by an uptick in investment returns as the sharp rise in fixed income yields means insurance companies are making money from investment securities.

It is also expected that the central bank’s hawkish stance is a boon for sector players who will be enjoying juicy yields which helps compensate for rising claims and underwriting expenses in a country beset by inflationary pressures and foreign currency volatility.

AIICO Insurance’s investment income rose by 51.38 percent to N8.02 billion in the period under review from N5.91 billion the previous year.

The insurer’s underwriting performance improved in conjunction with profit growth as combined ratio improved to 97.61 percent in June 2022 from 106.19 percent the previous year.

The combined ratio is typically expressed as a percentage. 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.

Even if the combined ratio is above 100 percent, a company can potentially still be profitable because the ratio does not include investment income.

The insurer’s gross premium written increased by 21.34 percent to N45.48 billion in June 2022 from N37.48 billion as at June 2021.

The major driver of top-line growth was the Non-Life Insurance which accounted for 34.14 percent of total revenue that expanded by 39.36 percent (year on year); Life Insurance which accounted for 59.41 percent OF GPW expanded by 7.73 percent (YOY).

Net premium income (NPI) rose by 17.15 percent to N33.67 billion in the period under review from N25.85 billion as at June 2021.

AIICO Insurance is able to curb operating expense growth as expense ratio reduced to 33.43 percent in June 2022 from 34.41 percent the period even as it operates in a tough and unpredictable macroeconomic environment.

It spends less on claims to generate revenue as claims ratio fell to 64.41 percent in the period under review from 71.77 percent the previous year.

The insurer has the financial strength to meet obligations to policyholders, and a solid solvency ratio means there are no threats to going concerns.

It paid N21.83 billion in claims in the first half of 2022, which is 4.43 percent higher than 2021’s N20.93 billion.

The company also invested in upscaling its technology infrastructure to boost customer engagement and service delivery through the launch of AIICO Ella (an official chatbot) and AIICO Express (a one[1]stop mobile application.

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