Mutual Benefits remains profitable despite headwinds

Mutual Benefits Assurance Plc has remained profitable amid an unpredictable macroeconomic   and low penetration environment as the Nigerian insurer recorded an underwriting profit of N3.88 billion in the half year.

Analysts say the stellar performance accentuates the firm’s better pricing models, improved underwriting decisions, better marketing campaigns, and enhanced claims handling.

Further analysis of Mutual Benefit’s financial statement showed combined ratios (CR) fell to 50.21 percent, lower than the 100 percent threshold.

It is generally accepted that regardless of the size of an insurance, these three goals is at the top of their priority- increased market share, lower loss ratios and reduced expenses.

Mutual Benefits, despite an impressive result, is however operating in an unpredictable and tough macroeconomic environment that undermines the growth of insurance companies.

These challenges have resulted in low penetration.

For now, penetration stands below 1% and has not kept pace with the GDP growth. This compares to Kenya’s penetration rate that grew to 3.3 percent in 2013, from 2.6 percent in 2008.

“Insurance penetration is low in Nigeria compared to many African countries because the policyholders are not getting sufficient value from the insurance companies,” said Debo Ajayi chairman, TAF Consulting Group.

Experts say the country’s insurance industry is fragmented and in its embryonic stage as the contribution of the sector to the economy is less than 1 percent.

Akin Ogunbiyi, managing director and CEO of Mutual Benefits, said Africa’s share in the global insurance market is a paltry 1.5 percent with South Africa contributing nearly 74 percent to this figure.

Ogunbiyi further stated that the insurance contributes close to 15 percent to South Africa’s Gross Domestic Product (GDP) while in Nigeria, it is still less than 1 percent.

Analysts are of the view that there is an urgent need for a scheme of mergers and acquisition in the insurance industry given their weak capital base and paltry market price per share.

The National Insurance Commission (NAICOM) and the Nigeria Insurers Association (NIA) are in talks on the proposed recapitalisation of insurance companies.

NAICOM, the body that regulates insurance business has asked 59 insurance companies to report the capital needs of their businesses in a financial condition report in preparation for capitalisation.

Analysts say the new scheme will help bolster the market value of these firms since their share price is below N4.

Mutual Benefits felt the pinch of the tough environment as gross premium income fell by 13.80 percent to N13.80 billion while net premium income dipped by 17.34 percent to N7.73 billion as at June 2016.

Mutual Benefit’s franchise retail unit, which was inaugurated one year ago to provide employment and income generating opportunity to retired, matured and experienced civil servants, ex-military and para military officers, bankers, architects, tax consultants, accountants, retired fire fighters and other business men and women, has generated over N250 million premium incomes for the company.