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Nem Insurance Plc has reported that Q2 net income jumped 37.94 percent to N3.49 billion compared to the same quarter last year, while underwriting income was N929.43 million with a combined ratio of 94.18 percent, in what market participants describe as a simply outstanding quarter.
Nem’s core underwriting profit in Q2 was N4.95 billion, up 34.14 percent from last year and a record for the company.
It is worth noting that the insurer has been maintaining an efficient underwriting performance since 2016 as the current year combined ratio is below the 100 percent benchmark.
Of course, the insurer’s exceptional underwriting performance was driven by strong premium revenue growth, excellent current accident year underwriting margins with a record combined ratio of 94.18 percent, favorable prior period reserve development, and excellent risk management strategy.
The combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations.
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.
The combined ratio hit an all-time high of 110.15 percent (see chart) in 2016 as a sharp drop in crude oil price sent inflation claims high as the country was tipped into its first recession in 25 years that same year.
Despite rising inflation and currency volatility that validates economic uncertainties, NEM Insurance is able earn more in premiums than the claims it pays out.
For instance, claims ratio fell to 19.03 percent in June 2023 from 35.03 percent as of June 2022. It paid out N3.51 billion to policy holders, which is lower than N4.31 billion paid out last year.
As a result of inflationary pressures and foreign exchange volatility combined with energy costs, expense ratio rose to 75 percent from 58.22 percent the previous year.
Nigeria’s inflation rate rose to 22.79 percent in the month of June 2023, representing a 0.38 percent points increase from 22.41% recorded in the previous month, according to data from the National Bureau of Statistics (NBS).
There has been a 63 percent slump in the value of the Naira. In addition, all the existing official FX windows were collapsed into the I&E FX Window.
Meanwhile, NEM Insurance’s net premiums written in Q2 of N18.47 billion were up 50.16 percent compared to the same period last year.
Gross premium income was up 44.84 percent to N26.55 billion as at June 2023 as the insurer uses market penetrating products to allure customers who crave for better services that are convenient.
A breakdown of gross premium inc0me per segment shows revenue from Motor spiked by 71.29 percent to N10.86 billion as at June 2023; Fire was up 55.47 percent to N8.24 billion.
The company saw revenue from oil and gas surged by 313.20 percent to N14.71 billion as it benefits from the Local Content Acts that gives Nigerian firms more participation in covering risk in the sector.