NEM Insurance Plc has reported a 26.50 percent rise in gross premiums written (GPW) to N10.01 billion for the first quarter of 2021, as well as an improvement in underwriting capacity.
The positive start to the year and improved margins is largely driven by the introduction of innovative products even amid the Covid-19 crisis and a tough and unpredictable macroeconomic environment.
Analysts say only managers that can think outside the box will see their firms navigate the storm, and that in a low yield environment, leveraging on technology to optimize costs and strong growth in revenue can help overcome the unfavorable underwriting environment.
Gross premium income spiked by 34.68 percent to N9.36 billion in the period under review as against N6.95 billion the previous year. Net premium income surged by 45.42 percent to N7.04 billion in the period under review from N4.84 billion the previous year.
Despite mounting obligations to policyholders, the insurer posted underwriting profit of N1.80 billion as at March 2021.
Claims expenses spiked by 92.26 percent to N2.55 billion from N1.32 billion the previous year. Claims ratio increased to 36.25 percent in March 2021 from 27.37 percent the previous year.
There was a surge in health travel and business interruptions, supply chain and event cancellation claims, no thanks to the coronavirus pandemic.
“Possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts,” said analysts at PWC in a recent research note.
While NEM Insurance’s combined ratio increased to 92.61 percent in March 2021 from 89.04 percent the previous year, it is below the 100 percent benchmark.
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.