Standard Alliance Insurance Plc, the composite insurance company licensed to transact all classes of life, non-life and special risks insurance businesses has recorded strong profit growth on the back of a sharp drop in claims expenses.
For the first six months through June 2015, Standard Alliance net income increased by 149 percent to N605.88 million from N234.74 million the same period of the corresponding year (H1) 2014.
Underwriting profit moved by 86 percent to N1.22 billion in June 2015 compared with N660.18 million.
The rise in profit means the Nigeria insurer will give back to the owners of the business in form of dividends.
BusinessDay calculations shows the surge in at the bottom line was as a result of claims expenses that reduced by 74 percent to N299.30 million in June 2015 as against N1.13 billion last year.
This implies the company is less aggressive about paying claims to policy holders as for every naira generated in premium income.
Claims ratio, which measures a firm’s aggressiveness to policy holders, fell to 11.92 percent in June 2015 compared with 44.84 percent the previous year.
Standard Alliance’s operating expenses increased by 39 percent to N753.89 million in June 2015 from N543.17 million last year. Operating expenses ratio moved to 30 percent in the period under review as against N543.17 million as at June 2014.
Premium penetration in Africa largest oil producer is low on the back of marcoeco0nomic weakness, lack of trust of trust for motor insurance, superstitious beliefs and religion.
For instance, in the north part of the country, people there say taking life insurance is Haram (abomination) while in the South such policies are seen as a premonition of death.
On top of that is the pressured consumer wallet, rising inflation and high rate of unemployment which makes taking a policy very difficult for people.
Insurance contributes less than one percent to the Nigeria economy of $510 billion (N100 trillion).
As a result of the aforementioned, Standard Alliance gross premium written fell by 1 percent to N2.51 billion in June 2015 as against N2.52 billion last year. Underwriting income was down by 6 percent to N2.24 billion in the period under review as against N2.37 billion last year.
Standard Alliance total assets grew by 35 percent to N10.43 billion in June 2015 compared with N7.72 billion the previous year. Shareholder’s fund 17 percent to N4 billion in June 2015 as against N3.41 billion last years.
The Nigeria insurer and its peers should brace up for more global uncertainties as Insurance profits will wane on elevated competitive pressures and industry risks, according to a recent report by S & P.
The company’s N0.50 on the floor of the exchange while market capitalization was N4.24 billion.
BALA AUGIE
