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AIICO Insurance Plc has met the minimum capital requirement by the regulator and combined with a strong solvency position above the threshold gives the insurer the leeway to retain more risk.
Analysts at Meristem Securities in a recent note to clients were of the view that an improvement in liquidity position and solid balance sheet should position the firm to increase its market share, generate new business and ultimately bolster its underwriting capacity.
Underwriting capacity is the maximum liability that an insurance company is willing to assume from its underwriting activities.
The more risk AIICO assumes because of its strong capital base, the more money it will make through the premium it charges.
Solvency margin of 2.92x is above the 1.00x threshold, according to Meristem Securities.
Last year, the company met the proposed minimum regulatory capital of N18.0 billion for composite players through a bonus issue worth N10.45 billion which was paid from the firm’s share premium and retained earnings account.
The largest listed insurer by total asset in Nigeria saw an improvement in underwriting income boosted by reduction in actuarial valuation, but a fair value loss on financial assets prevented top line (sales) impressive performance from translating into bottom line (profit) growth.
It posted an underwriting profit of N29.49 billion in December 2021 from a loss position of N36.27 billion as at December 2020.
The underwriting income was bolstered by N19.86 billion change in life and annuity fund, but the insurer recorded negative real underwriting results of N2.34 billion.
Gross premium written (GPW) was up 16.31 percent to N71.68 billion in December 2021 from N61.97 billion as at December 2020.
A strong capital position and steady growth in revenue means the insurer can meet its obligation to policyholders.
It paid total claims of N39.83 billion in December 2021, which is 25.84 percent higher than 2020’s N31.65 billion. Claims ratio moved to 67.98 percent in the period under review against 59.98 percent the previous year.
The successful launch of innovative products has yielded fruit as they contribute to revenue growth, and the life business maintained its position as the largest contributor to premium income.
Gross premium written (GPW) was up 16.31 percent to N71.68 billion in December 2021 from N61.97 billion as at December 2020.
A breakdown of GPW shows premium income from non-life rose by 36 percent to N19.04 billion in December 2021 from N14 billion as at December 2020. Premium income from the Life segment increased by 19.45 percent to N49.73 billion in December 2021 from N41.63 billion the previous year.
Analysts at Meristem Securities are optimistic that AIICO sale of 39.15 percent of its pension business to FCMB Pensions will enable the company to double down on its core insurance business.
“We expect this development as well as improvement in net fair value gains and moderate growth investment income to support the bottom-line,” said the analysts.