Sunu Assurance Plc has surmounted the coronavirus crisis and difficult business environment as the insurer returned to profit on the back of strong growth in premium income.
The underwriter posted profit after tax of N237.93 million in December 2020, from a loss position of N225.26 million as at December 2019.
Despite the once-in-a-century global crisis, the insurer’s products have been making an inroad into the Nigerian market, and such growth has trickled to the top line (revenue).
Net premium income spiked by 33.64 percent N3.08 billion from N2.31 billion the previous year while gross premium income surged by 33.37 percent to N3 billion in December 2020.
The insurer posted an underwriting profit of N1.63 billion as at December 2020, which represents a 38.13 percent uptick from 2019’s N1.18 billion.
The restructuring initiatives and strategic business transformation carried out in recent quarters helped to mitigate the effect of economic challenges.
Notably, the company had experienced a remarkable turnaround since the acquisition of the former Equity Assurance Plc by SUNU Assurance Group in 2016.
Equity Assurance was at the brink of collapse as total operating expenses were higher than or exceeded premium income, but capital injection by the new core investors-who used reorganisation and reconstruction strategies- helped to reinvigorate the insurer’s operations.
SUNU was incorporated as Equity Assurance Nigeria on December 13, 1984 and was licensed to underwrite all classes of general business.
However, the company changed its name from Equity Assurance Plc to SUNU Assurances Nigeria Plc with due approval from the shareholders and its regulator, NAICOM. The approval was dated 29th March, 2018 and a new license was issued by NAICOM.
In December 2020, Sunu Assurance successfully completed the first phase of its recapitalisation plan by increasing shareholders’ fund to N6.61 billion from N3.47bn in 2019.
To bolster balance sheet position and take more big-ticket risk, the insurer raised N3.01 billion through private placement that was 100 percent oversubscribed.
But the Nigerian insurer is struggling with an unfavorable underwriting environment, as it is paying out more money in claims than it is earning from premium income.
Insurers in Africa’s largest economy are spending more in total operating expenses to generate revenue, since they operate in a high inflationary environment, while they spend copiously on diesel oil to power generator plants at the head office and branch offices across the country.
Following observations from the financial accounts submitted by some companies, the National Insurance Commission (NAICOM), said those with huge expenditure profiles were mandated not to spend beyond certain limits.
The policy maker said the decision was taken to ensure companies do not spend unnecessarily to the extent that they would not be able to attend to claims settlement and some other relevant matters in the industry.
SUNU Assurance’s total expenses (management expenses plus underwriting expenses) stood at N2.70 billion as at December 2020, which is 88.13 percent of Net premium income, according to MoneyCentral calculations.
Interestingly, claims expenses increased by 14.35 percent to N752.44 million in the period under review as against N657.98 million as at December 2019.
Combined ratios deteriorated to 111.85 percent in the period under review from 136.38 percent the previous year, according to MoneyCentral calculations.
The combined ratio measures the money flowing out of an insurance company in the form of dividends, expenses, and losses. Losses indicate the insurer’s discipline in underwriting policies. A ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.