Niger Insurance Plc is paying out more in management and claims expenses than premium it earns or writes, little wonder the insurer has been recording recurring losses that resulted in technical insolvency.
An outrageously high expense ratio laid bare deteriorating revenue and widening underwriting losses.
Analysts say owners will have to inject fresh capital into the company so as to strengthen operations, adding that the entity needs to introduce innovative products as well as embracing digitalization.
For the first nine months through September 2021, Niger Insurance posted a loss after tax of N1.87 billion from a loss of N613.86 billion the previous year.
The company has been recording losses in the past three years.
Since expenses are growing faster than premium income, it is not surprising that the insurer is grappling with huge liabilities. Accumulated losses hit N10.51 billion in September 2021, which is 50.71 percent higher than 2020’s N6.98 billion the previous year.
Total assets of N21.66 billion is lower than liabilities of N22.24 billion, resulting in a negative shareholders’ fund of N575.62 million.
The company’s 708.78 percent combined ratio is the highest in the industry, a figure that is higher than 2020’s 289.67 percent, according to MoneyCentral’s calculations.
Interestingly, claims expenses of N1.06 billion are 3.26 times premium income and it is worthy to note that the insurer is spending more on operations to generate premium income as management expenses are 3.59 times revenue.
Claims expenses increased by 13.28 percent to N1.06 billion in 2021 from N935.68 million in 2020. Loss ratio moved to 327.04 percent in the period under review from 327.04 percent the previous year.
Total expense ratio rose to 38.74 percent in 2021 from 155.47 percent the previous year. Management expenses were up 15.84 percent to N1.17 billion in September 2o21 from N1.01 billion the previous year.
The insurer posted an underwriting loss of N793.75 million from N291.68 million, and the widening operating losses that indicates inefficiency shows lack of retention policy.
In January 2021, the company had planned to bolster cash flow and restructure its balance sheet with the sale of real estate and investment property valued at N15 billion.
It said proceeds of the sale would also be utilized to add impetus to efforts to meet the recapitalisation requirements of the insurance industry.
Further analysis of the financial statement of Niger Insurance shows gross premium income dipped by 53.81 percent to N352.98 million in 2021 from N764.32 million as at September 2020.
Net premium income increased by 53.34 percent to N325.38 million in September 2021 from N697.26 million as at September 2020.