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Universal Insurance Plc has remained resilient, overcoming unfavorable underwriting conditions as the insurer recorded profit growth, thanks to an improvement in revenue from oil and gas business as Nigerian firms are taking advantage of the local content laws and regulations.
For the year ended December 2022, Universal Insurance’s net income was up 39.93 percent to N525.32 million from N376.96 million as at December 2021.
The improvement in profit was largely driven by net premium income from oil and gas that surged by 100.31 percent to N1.08 billion as at December 2022 and a reduction in management expense ratio, but the company still reels from claims inflation as the replacement costs of assets have gone up.
While the insurer saw a 22.69 percent increase in underwriting profit to N1.73 billion as at December 2021, it recorded negative real returns of N399.30 million in the period under review.
The real underwriting results is a better measure of operating efficiency because it includes management expenses in its calculations.
Universal Insurance’s combined ratio deteriorated to 109.54 percent in the period under review from 107.04 percent, according to MoneyCentral calculations.
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 insurer paid N677.02 million to policyholders, which represents a 92.39 percent increase from 2021’s N351.02 million.
Insurers in Africa’s largest economy are feeling the pang of an aggressive monetary cycle by the central banks that sent claims rising, and that is combined with the impact of a red-hot inflation on operating expenses.
Rising inflation, currency devaluations, huge energy costs, and other challenges scupper profit margins, which is why shareholders get abysmally poor dividends compared to the returns they get from banks.
While Nigeria’s headline inflation dropped to 21.34 per cent in December from the 21.47 per cent recorded in November, it is still the highest in 17 years.
Universal Insurance’s products are making an inroad into the Nigerian market and they are contributing to top line (revenue) growth.
The company saw net premium income spiked by 52 percent to N4.18 billion as at December 2022, from N2.75 billion as at December 2021.
Universal Insurance was named the company with the highest Earnings Yield for 2022 among the companies that were listed on the Nigerian Stock Exchange by the organisers of the Pearl Awards.
“It is an award that has remained credible and steadfast in promoting the capital market. I want to specially commend the organisers, and everyone present here,” Babajide Sanwo-Olu, Lagos State Governor.
“We need the funding and the stability of the capital market even as public administrators to be able to deal with and have long-term funding,” said Sanwo Olu.
Universal Insurance has an earnings yield of 2.94 percent, which means its shares are attractive and the appropriate entry point for investors.