It is good tidings that the insurance sector has ridden out of the coronavirus pandemic debacle that crippled economic activities throughout 2020.
Interestingly, a stellar performance by the Finance and Insurance sector saw a +23.23 percent growth as against the -2.48 percent, recorded in Q2 2021.
Recent data released by the National Bureau of Statistics (NBS) on the Nigerian economy showed that national economic output grew at an annualised rate of +4.03% in the three months to September, down from +5.01% in Q2 2021.
However, listed firms with poor valuations are feeling the pang of systematic risk as inflationary pressures and currency devaluation are partly responsible for rising claims and expense ratio.
While there has been growth in premium incomes buoyed that the reopening of the economy, mounting obligations and rising operating and underwriting expenses have prevented top line impressive performance to translate into bottom line (profit) growth
Insurers are spending more on claims than the premiums that they are receiving as the combined ratio for the majority of them have exceeded the 100 percent benchmark.
Despite these challenges, some listed insurers have been able to record strong earnings and improved efficiency.
NEM Insurance Plc
NEM reported an impressive 36.50 percent rise in gross premium income to N21.34 billion as at September 2021, with significant increase across all business segments.
Although underwriting performance slightly weakened, NEM has the best underwriting performance among the companies under our coverage with the lowest average combined ratio of 96.86 percent as at September 2021 from 89.53 percent the previous year.
Interestingly, it reported real underwriting results of N1.09 billion, while underwriting profit spiked by 51.70 percent to N3.94 billion.
NEM utilised the resources of its owners in generating higher profit as return on equity increased to 14.56 percent in September 2021 from 8.34 percent the previous year.
The insurer’s net profit margin was up 13.49 percent in the period under review from 10.71 percent the previous year.
Cornerstone Insurance Plc
Cornerstone Insurance was resilient even amid the coronavirus pandemic, consolidating on its market penetrating products.
The insurer recorded improvement in key performance metrics, but capitulated to the unfavourable underwriting environment as the combined ratio broke scale.
Return on equity increased to 11.31 percent in the period under review from 7.62 percent as at September 2020.
Net income spiked by 66.08 percent to N1.53 billion while gross premium income was up 22.87 percent to N14.65 billion in September 2021 from N11.92 billion the previous year.
Mutual Benefit Plc
While the insurer recorded net loss, it has the best underwriting performance among peer rivals as its combined ratio was the lowest.
The net loss was due to fair value loss on financial assets that are a one-off event, and if the event doesn’t occur in the last quarters of the year, the company will be recording profit needed to distribute dividend to shareholders.
Its combined ratio stood improved to 92.23 percent in September 2021 from 106.16 percent as at September 2020.
That translates to a positive real underwriting result of N1.34 billion, while underwriting income was up 86.24 percent to N5.95 billion in September 2021 from N2.76 billion the previous year.
Mutual Benefit recorded the fastest revenue expansion in the industry. Gross premium income was up 41.81 percent to N19.089 billion in September 2021 from N14.02 billion the previous year.