NEM Insurance Plc disciplined underwriting policies and the efficiency with which it uses its resources to drive revenue growth means the insurer is more profitable than listed peer rivals who are reeling from unfavorable underwriting conditions.
This is because it has the lowest combined ratio among the largest listed companies and has generated positive real underwriting results.
For instance, NEM Insurance has a combined ratio of 90.26 percent as at December 2021 and a positive real under results of N1.44 billion, according to MoneyCentral calculations.
That compares to Mutual Benefit, (102.10 percent); AIICO Insurance, N104.78 percent); AXA Mansard, (103.62 percent); Coronation Insurance, (162.97 percent), Cornerstone Insurance, ( 103.94 percent), and Consolidated Hallmark, (114.92 percent).
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.
Many insurance companies believe that the combined ratio is the best way to measure success because it does not include investment income and only includes profit earned through efficient management.
It is important to note that analysts prefer to use the real underwriting results to gauge underwriting capacity because unlike the underwriting profit, it includes the management expenses.
NEM Insurance N6.05 billion in claims to policyholders, however, it spends less on claims to generate premium income as claims ratio increased to 31.12 percent in December 2021 from 38.25 percent the previous year.
Management expenses were up 2.19 percent as at December 2021, which is less than 15.63 percent January inflation figures.
Despite a challenging environment as evidenced, NEM Insurance is able to record double digit growth at the top-line; and that validates its focus and market penetration strategies and retention policy.
Gross premium written (GPW) increased by 24.10 percent to N27.34 billion in December 2021 from N22.03 billion the previous year.
Gross premium Income (GPI) was up 23.33 percent to N26.74 billion as at December 2021 from N21.68 billion as at December 2020.
NEM Insurance and peer rivals are unable to record strong growth in investment income, and that undermined profitability.
Net income dipped by 14 percent to N4.36 billion in the period under review from N5.07 billion the previous year.