Sovereign Trust Insurance Plc has maintained efficient underwriting capacity amid rising claims expenses as the Nigerian insurer’s underwriting profit rose 30.17 per cent in the first quarter.
Underwriting profit for the first three months through March was N746.13 million as against N571.90 million the previous year, despite 70.15 per cent rise in claims expenses.
Total claims expenses incurred in the period under review stood at N563 million; claims expense ratio moved to 34 per cent in March 2017 from 20.04 per cent the previous year.
Naira devaluation which came on the heels of flexible exchange rate by the central bank last year ballooned claims as insurers took such covers when the exchange rate was N197-N199 per dollar. The naira now trades between N385 to N400 at the parallel market, trading at N305 at the black market.
Nigerian insurers operate in an economy that slipped into its first recession in 25 years on the back of lower oil price and severe dollar shortage.
In a country where insurance is perceived as a want and not a need, it is difficult for insurance companies to thrive, said Owolabi Salami, chief responsible officer of Ensure Insurance.
“We don’t have new firms coming in as a result of the recession instead they are laying offs. Construction, real estate, oil and gas and manufacturing are tied to the economy,” said Salami.
The insurance industry grew 1.1 per cent in the fourth quarter versus 5.1 per cent year on year, according to a February report by the NBS.
The industry grew at an average 19 per cent a year from 2006 to 2015, with premiums of N313 billion ($995 million) and total assets of N941 billion at the end of 2015.
In spite of the economic downturn Sovereign Trust Insurance’s net premium income increased by 48.70 per cent to N1.65 billion while gross premium written and gross premium written spiked 102.97 per cent and 77.77 per cent to N3.83 billion and N4.14 billion respectively.
The Nigerian insurer is profitable and efficient as its combined ratio (CR) of 70 per cent is below the 100 per cent threshold.
The CR is the addition of loss ratio and underwriting expenses.
Sovereign Trust Insurance’s net profit spiked by 97.53 per cent to N437 million in the period under review from N215 million the corresponding period of last year.
