AIICO Insurance Plc is the largest listed insurer by premium income in Nigeria but spiraling change in life and annuity costs led to a reduction in net income even as the insurer realized sizable income from investments.
For the first six months through June 2020, AIICO Insurance posted gross premium income of N29.07 billion, which compares to AXA Mansard, (N22.73 billion); NEM (N11.22 billion); Mutual Benefit (billion); Wapic, (N8.10 billion); Royal Exchange, (N7.34 billion); Cornerstone, (N6.76 billion), and Consolidated Hall Mark (N5.06 billion).
AIICO’s Insurance premium growth accelerated on the back of contribution from Life (individual and group) business, as its innovative product continues to make an inroad into the Nigerian market.
Net premium income spiked by 25.16 percent to N25.78 billion as at June 2020 from N20.60 billion the previous year.
AIICO Insurance’s (Life and Group) segment generated N20.04 billion in the period under review, and that represents an uptick of 35.13 percent to N14.83 billion as at June 2019.
Insurers saw more demand from government and employers of health workers for life cover at the zenith of the coronavirus pandemic, which means the sale of group life policy, could jump at year end.
However, analysts have warned that that lower demand and investment returns, a significant deterioration in the credit quality of fixed income securities and increased mortality rates from the coronavirus pandemic could pressure earnings in the life segment or business.
The Covid-19 crisis paralyzed business activities across the country as government was forced to impose lockdown to curb the virus.
Expectedly, the economy capitulated to the headwinds as Gross Domestic Product (GDP) contracted by 6.10 percent in the second quarter 0f 2020, according to a recent report by the National Bureau Statistics (NBS).
The insurance sector of the economy contracted by 28.15 percent, the Abuja based statistics body added.
Analysts attribute insurance sector poor level of growth to little awareness and understanding of insurance products, lack of trust especially with regards to claim settlement, socio-cultural and religious beliefs of Nigerians, weak enforcement of compulsory insurance policies and the slow pace of innovation amongst industry participants.
Further analysis of the financial statement of AIICO insurance showed it posted an underwriting loss of N10.85 billion in June 2020, from a profit position of N5.64 billion the previous year.
The underwriting loss was largely driven by N16.83 billion change in Life and Annuity Fund the insurer incurred in the period under review.
This item has been eliciting recurring underwriting loses over the past four years, but income from investment income has been erasing these losses, which paves the way for the insurer record consistent net income.
Net income dipped by 2.18 percent to N2.78 billion as at June 2020, while investment income and fair value gains stood at N19.07 billion.
AIICO Insurance paid N9.83 billion in claims in the period under review, which represents 8.89 percent increase from 2019’s N8.54 billion.
The insurer is earning more in premium income than it is paying out in claims as combined ratio improved to 88.30 percent in June 2020 from 94.71 percent the previous year.