Prestige Assurance Profit Surges on Strong Underwriting, Lower Cost

Prestige Assurance Plc reported first quarter (Q1) earnings that trounced analysts’ expectations as profit surged on the back of reduction in operating and claims expenses, but analysts see future obligation to customers mounting due to Covid-19 shocks.
Underwriting income, which is the difference between premiums an insurer collects and claims it paid out, spiked by 73.73 percent to N875.87 million as at March 2020 from N505.13 million as at March 2019.
Net operating product spiked by 45.29 percent to N964.86 million as at December 2020.
Prestige Assurance’s market penetrating products are adding impetus to revenue and guaranteeing good return on investment, as it generates more profit on sales than peer rivals despite an economic downturn.
In 2018, it launched two new products, the prestige Salary Protection Shield and the Mediclaim policy with both products showing success and potentials.
The company said that the industry largely depends on sound underwriting, prompt claims settlement, and proper funds management with innovative information technology.
Prestige Assurance combined ratio-which excludes changes in losses for past years- fell to 64.5 percent in December 2018 from 92.57 percent a year earlier. A combined ratio below 100 percent means the insurer earns more in premium that it pays out in claims.
The marked improvement in underwriting income is majorly as a result of a 70.12 percent reduction in claims expenses to N99.04 million as at March 2020; claims ratio otherwise known as loss ratio fell to 7.49 percent in the period under review as against 30.10 percent the previous year.
Analysts say insurance companies should brace for huge claims as there were incidences of theft and looting during the lockdown period as the coronavirus pandemic has ravaged the economy.
Also, people that lost their jobs during period of lockdown will want to be settled, which exposes companies to solvency risk.
The global accounting firm Pricewatercoopers said in a latest report “Covid-19 and the Nigeria Insurance Industry” that with most businesses in uncharted territories, there is a heightened risk of a surge in claims for health, travel and business interruptions, supply chain and event cancellations.
They warned that there could be possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts from the coronavirus pandemic.
Gross premium written rose by 7.07 percent to N2.12 billion as at March 2020 as against N1.98 billion as at March 2019; net premium income jumped by 20.11 N1.32 billion as at March 2020 as against N1.10 billion as at March 2019.
Prestige Assurance Plc said it would boost its gross premium income to N9 billion by the year 2021.
The company has utilized the resources of shareholders in generating higher profit while it turned each Naira invested in sales into a robust bottom line.
Net profit margins increased to 44.013 percent in March 2020 from 32.17 percent the previous year while return on average equity increased to 25.77 percent in the period under review from 16.82 percent as at March 2019.