Life underwriters deepen industry’s penetration with 2019 financial results
… Optimistic to scale through 2021 recapitalisation exercise
The ongoing recapitalisation exercise in the insurance industry may be getting the necessary boost, as the life underwriters at the weekend expressed readiness for the exercise through their 2019 financial result; saying a process is a form of a corporate reorganisation, which involves making substantial changes in the capital structure.
Recapitalisation is one of the strategies companies use to improve their financial stability. The insurance industry post-recapitalisation is expected to be robust and capable of taking big risks, as well as contribute meaningfully to the nation’s Gross Domestic Product. The decision to recapitalise may be taken by the company voluntarily, or in compliance with a regulatory directive.
In the latter sense, recapitalisation has proven to be a useful tool in the hands of the authorities for sectoral reformation to sustain adequate economic growth and development.
Following the September 30, 2021 recapitalisation deadline given by the National Insurance Commission (NAICOM), to all underwriting companies to upgrade their capital to a new threshold, only a few of the life underwriters are woo Nigerians with their performance in their Gross Premium Written (GPW) in 2019 financial year as it was better compared to 2018 same year.
The regulatory body had said Life insurance companies were required to increase their minimum capital requirement from N2 billion to N8 billion, amounting to 400 per cent increase while other operators such as those with a composite licence to upgrade their capital base from N5 billion to N18 billion. Similarly, General insurance companies are to raise their capital base to N10 billion from N3 billion, while Reinsurance firms will now need N20 billion minimum capital to operate in Nigeria.
Among few life insurance operators showing eagerness for the recapitalisation exercise are: African Alliance Insurance Plc, FBN insurance Limited and Mutual Benefits Life Assurance Limited,
Speaking with The Guardian over the weekend, the Executive Director, Finance, African Alliance Insurance, Olabisi Areole, attributed the increased revenue to shrewd underwriting and better communication of the value of insurance to the retail market. “We have grown the retail business to become much more profitable and have supported their sales efforts with targeted communication both above the line and below the line.
Adekola noted “The bulk of claims were in annuity the business of which has been affected by the operating environment vis-à-vis the average market rate and limited investment vehicles. We all know annuity business is basically about hedging assets against contract liabilities, so when the market forces are unfavourable, returns on investment will be affected too.”
She stressed that in compliance with the new minimum capital requirements, the company has recorded N7.29billion premium in 2019 against N5.17billion in 2018 representing a 41% growth year on year while its life fund grew by 16% from N38.99billion to N45.33billion in the same period under review.
The increase in both premium generated and the life fund lend credence to the company’s strong customer base, continued acceptance, as well as a robust sales, drive across both retail and corporate lines of business.
The firm demonstrated relentless commitment to its teeming consumers by paying claims totalling N9.36billion as against N8.78billion the previous year, a 7% increase year-on-year rise.
She further expressed confidence in the firm’s ability to turn the bend going by its corporate strategy. “Our strategy has been to keep growing our market share via aggressive sales drive, adoption of digital technology and capital injection. We own viable assets home and abroad which we are certain would aid our quest to capitalize. Indeed, our recapitalization plan is key to our bounce-back strategy,” she said.
Commenting on the kind of results that would attract more policy intake to the industry and future outlook, the Chairman, FBN General Insurance, Gbenga Shobo, said the 2019 financial results showed that Gross Premium Written grew by 58 per cent from N4.63 billion in 2018 to N7.31 billion.
“We also recorded a 19 per cent increase in Profit Before Tax (PBT) of N733 million compared to N615 billion recorded in 2018.”
Similarly, the Managing Director/Chief Executive Officer, Bode Opadokun, noted that the sector witnessed an impressive growth along key metrics and across major lines during the financial year.
Further analysis of FBN General Insurance showed 17 per cent growth in total assets in 2019, translating to N11 billion above the N9.4 billion recorded in 2018. The company also ensured prompt claims payment to its customers during the year to the tune of N2.3 billion. Similarly, Mutual Benefits Assurance Plc, reported profit after income tax of N3.61 billion in 2019, a 214 per cent increase over the N1.15 billion recorded in 2018.
Its audited account released on the floor of the Nigerian Stock Exchange (NSE), showed gross premium written rose by 18% from N15.84 billion in 2018 to N18.7 billion in 2019. Net premium income stood at N15.29 billion, a 13 per cent increase over the N13.48 billion in 2018.
The Managing Director, Mutual Benefits, Femi Asenuga, confirmed that the life segment paid combined claims amounting to N21 billion in 2019, while the general business paid N3.2 billion, while Life Business paid N17.8 billion.
A breakdown of the claims paid by Mutual Benefits indicated that Maturity Claims accounted for the highest at N8.00 billion, followed by Surrender Claims at N4.28 billion, and Group Life Claims at N4.03 billion. Partial withdrawal stood at N1.26 billion with Credit Life, Individual Death Claims, and Annuity Claims accounted for N75.59 million, N105 million and N45.62 million, respectively. These however represent a 12.1% decrease from the total claims of N20.25 paid last year.
For the Non-Life Business, Gross Claims paid was N3.2 billion. Motor Claims being the highest was N1.22 billion, followed by Fire Claims at N859 million. Special Risks (Aviation/Oil & Gas) attracted N472.12 million Claims, and Marine Claims were N180.144 million.
Also, the Chairman of Prestige Assurance Plc, Adedoyin Salami, said the Company as at December 31, 2019, grew gross premium written to N6.129 billion from N4.792 billion in 2018, indicating a 27.88 per cent increase.