|
Getting your Trinity Audio player ready...
|
AXA Mansard Insurance Plc, Nigeria’s largest insurer by market value, has shown resilience amid an unpredictable macroeconomic environment as the insurer’s combined ratios improved.
For the first three months through March 2017, AXA Mansard’s combined ratio (CR) improved to 79 per cent as against 82 per cent the previous year. The CR shows the underwriting profitability of the insurer. The lower it is, the better the insurer has performed.
A CR of less than 100 is considered better as it shows that the insurer is earning more by way of premiums relative to the claims paid and the operating expense incurred.
Analysts say that the insurer’s impressive results were caused by robust underwriting results and effectiveness in product development.
Indeed, AXA Mansard’s underwriting capacity was efficient as underwriting profit increased by 82.37 per cent to N1.25 billion despite a 36.63 per cent rise in reinsurance expenses.
The Nigerian insurer’s leverage (premium to surplus) ratio fell to 141 per cent in the period under review, from 197 per cent the previous year.
The premium to surplus ratio is used to measure the capacity of an insurance company to underwrite new policies.
The reduction in leverage ratio signals AXA Mansard’s financial strength because the insurer is theoretically using its capacity to write more policies.
AXA Mansard’s policy surplus, the difference between its total assets and its total liabilities, increased 5 per cent to N18.23 billion. Policy surplus is otherwise known as shareholders fund or equity,
It also means the insurer is able to increase the gap between assets and liabilities by effectively managing the risks associated with underwriting new policies, by reducing losses from claims, and by investing its premiums in order to achieve a return while maintaining liquidity.
While AXA Mansard may have recorded impressive results to start the year, the insurer operates in a torrid environment.
A sharp drop in the price of oil since mid-2014 and a severe dollar scarcity tipped the country in its first recession in 25 years.
While the adoption of a flexible exchange rate was a boon for banks as dollar denominated assets rose, the policy was disadvantageous to insurers as claims expenses ballooned.
Experts say many insurers had underwritten claims when the exchange rate was around N199 to one dollar. These firms had to honour obligation to policyholders at a rate of N400 to a dollar as the naira lost 40 per cent of its value against the U.S currency.
Despite the challenges besetting the industry, AXA Mansard’s gross premiums increased 46 per cent to N12.87 billion. Gross earned premium rose 27 per cent to N6.21 billion; net premium income grew 20 per cent to N3.31 billion. Net profit for the period was up 5.49 per cent to N738 million.
AXA Mansard’s claims expenses for the quarter climbed 14 per cent to N2 billion versus N1.8 billion the previous year. Claims ratio fell to 60 per cent in the period as against 63.63 per cent the previous year.
AXA Mansard gained 4.67 per cent to close at N1.57 on the Nigerian Stock Exchange as market capitalization stood at N16.48 billion.
BALA AUGIE
