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Royal Exchange Insurance Plc has continued to gain momentum amid a volatile and tough operating environment as the insurer recorded a double digit growth in half year profit.
In spite of the hostile operating environment experienced by the insurance sub-sector and the financial services industry generally, Royal Exchange’s profit after tax (PAT) increased by 18.80 percent to N203.31 million in June 2017 from N171.13 million the previous year.
The Nigerian insurer has an efficient underwriting capacity as underwriting profits were up 4.45 percent to N1.38 billion. Net income was up 29.03 percent to N2.40 billion as at June 2016, driven by 302.11 percent surge in investment and other income to N898.84 million.
The company’s combined ratio of 74.76 percent in the period, though lower than the 75.51 percent recorded last year, is lower than the 100 percent industry threshold.
A ratio lower than 100 percent means a firm is profitable and there are no threats to going concern status.
Insurers in Africa’s most populous and largest economy are operating in a tough and unpredictable macroeconomic environment as valued customers such as banks, oil companies, and telecoms firms slashed insurance budget.
As a result of macroeconomic crises, some companies laid off staff while others cut back on expansion plans.
Nigeria’s unemployment rate rose to 14.2 per cent in the fourth quarter of 2016 from 13.9 percent recorded in the preceding period, according to a recent report by the National Bureau of Statistics (NBS).
Nigeria’s economy contracted by 0.52 percent in 2016 as it faced its first recession in 25 years. Inflation for the month of June stood at 16.10 percent.
Insurance industry contributed less than one percent to an economy of $492 billion, according to the 2014 rebased estimates of the National Bureau of Statistics (NBS).
Experts say apathy towards insurance, lack of awareness about insurance products and weak regulation are undermining premium income.
In spite of the above challenges, company’s gross premium written increased by 11.15 percent to N9.37 billion as at June 2017, from N8.43 billion recorded the previous year.
The Nigerian insurer’s net claims expenses dropped 9.34 percent to N1.76 billion in June 2017 as against N1.94 billion as at June 2016.Claims ratios fell to 40.70 percent in June 2017 from 44.80 percent the previous year.
The insurer said that it expected a healthy growth in micro insurance products and services, which will be underpinned by the emerging ICT innovations and a growing digital influence expected to drive penetration and financial inclusion among the lower income class.
Royal Exchange has total asset of N26.56 billion while shareholders funds stood at N6.59 billion as at June 2017.
BALA AUGIE
