Directors of Niger Insurance Plc are drinking wine poured from a flagon into golden goblets as their emoluments and staff salaries exceed the revenue of a company drowning in recurring losses.
In a civilised clime, stewards of companies take a drastic pay cut to help shrink operating cost of a beleaguered firm.
For instance, Hui Ka Yan, the owner of debt-stricken China developer Evergrande, has injected $1.09 billion from his own pocket to save the firm from collapse.
Niger Insurance has been struggling with a huge expense ratio as it continues to spend more on operating expenses in generating revenue that is deteriorating, which is why it posted a loss of N2.10 billion in December 2020 from a net loss of N5.15 billion as at December 2019.
Interestingly, management expenses that comprise directors pay, workers’ salaries and miscellaneous expenses stood at N3.15 billion, which is 3.18 times net premium income.
In short, total expense ratio (management and underwriting) increased to 328.52 percent in December 2020 from 223 percent the previous year, according to MoneyCentral’s calculations.
Niger Insurance and other sector players felt the pang of the coronavirus pandemic that undermined insurance demand as renewals were halted as business activities shut down due to a lock down policy imposed by the government.
Also, the low yield environment brought on by the central bank’s dovish stance has beaten down investment returns, and the income helps strengthen the bottom line (profit).
Drilling down the books of the insurer reveals some intriguing numbers that will most likely spook shareholders.
Directors emolument and employees pay of N1.87 billion alone is 1.88 times premium income, but analysts are saying that stewards ought to have taken a pay cut.
The directors of the company jerked up their pay by 9,262 percent to N670.77 million in December from N7.16 million the previous year.
If stewards’ rewards are tied to performance, then they would not have gotten such compensation because the company’s net premium income dipped by 36.93 percent to N990.11 million as at December 2020.
It is not surprising that the insurer has a weak market position and a poor operating performance underscores the deteriorating underwriting performance.
There are growing concerns that the insurer may have difficulty meeting obligations to policyholders because it is not generating enough earnings to cover liabilities, while shareholders’ funds otherwise known policy surplus ratio is receding.
Total claims expenses were down 72.64 percent to N922.72 million in December 2020 from N3.37 billion as at December 2019. Claims ratio reduced to 93.19 percent in the period under review from 215.07 percent the previous year.
Niger Insurance is paying more in claims than the revenue it earns as combined ratio has hit 421.71 percent as at December 2020, the highest among the companies tracked by MoneyCentral.
The Company’s assets meant for Policyholders Fund is N6.106 billion which is less than the Policyholders’ liabilities of N11.629 billion by N5.523 billion. Also, the company maintained a Solvency below the minimum required by 278 percent.
It posted an underwriting loss of N18.05 million, that is 99.19 percent lower than 2019’s N2.10 billion.
Analysts are worried that huge losses are gradually taking its toll on shareholders’ funds that have reduced by 51.63 percent to N2.07 billion as at December 2020.