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Friday, March 31, 2023

Mutual Benefit Slides on N5.51bn Q3 Fair Value Loss

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Mutual Benefit Assurance Plc has posted a net loss of N3.46 billion for the third quarter of 2021, after incurring N5.51 billion net fair value loss on financial assets.

The results will be sending a chill down the spine of shareholders who may not be getting a dividend if the net loss stretches into the fourth quarter.

However, the good tiding is that net fair value gain or loss are a one-off event and are not expected to recur at all times, and if it doesn’t show face in the books in the fourth quarter, the company will be rewarding its owners from distributable profit.

It is noteworthy that Mutual Benefit has an efficient underwriting capacity, buoyed by strong revenue growth as it earns more in premium than it pays out in claims.

Despite the unfavorable underwriting environment as evidenced by inflationary pressures and currency volatility, the combined ratio improved to 92.23 percent in September 2021 from 103.45 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.

Of course, the insurer posted underwriting profit of N5.95 billion in September 2020, and that represents an 86.52 percent increase from 2020’s N3.19 billion the previous year.

The reopening of the economy and the successful rollout of vaccines that underpinned gradual economic recovery accelerated the take up of cover and renewal, and Mutual Benefit benefitted from the rebound in business activities as revenue significantly improved.

Gross premium written increased by 51.57 percent to N22.45 billion in the period under review from N14.81 billion as at September 2020.

A Breakdown of gross premium written shows premiums from the non-life segment spiked by 75.60 percent to N14.40 billion in September 2021’ Life business increased by 21.78 percent to N8.05 billion.

Net premium income followed the same growth trajectory as it spiked by 45.97 percent to N17.36 billion in the period under review from N5.46 billion the previous year.

The insurer is honoring obligation to policyholders, and it has enough reserve to meet responsibilities.

It paid N7.15 billion in claims in the third quarter, which is 30 percent higher than 2020’s N5.50 billion. Loss ratio fell to 41.15 percent in the period under review from 46.52 percent as at September 2020.

Despite the investment on new talent and the amount spent on the acquisition of new assets, expense ratio reduced to 51.06 percent in September 2021 from 59.89 percent the previous year.

The company had fully met the new capital requirement set by NAICOM, and it has shareholders’ funds of N20.54 billion as at September 2021.

Life insurance underwriting firms, which currently have a minimum paid up share capital of N2 billion, will compulsorily shore up their capital to N8 billion, representing a 200 percent increase.

By the new paid-up share capital regime, Insurance firms underwriting general business have been mandated to shore up their capital from N3 billion to N10 billion. Composite insurance firms, that is, firms underwriting both life and general business will raise their capital from the current N5 billion level to N18 billion.

Reinsurance firms will move up from the current minimum capital of N10 billion to N20 billion.

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