AIICO Insurance Plc, a financial services group says its performance in the third quarter of 2017 is strong in line with its medium and long term growth strategy.
AIICO Insurance PLC is a composite insurer with interests in Life, General and Health insurance as well as Asset Management and Pensions.
Tunde Fajemirokun, chief operating officer of the Company talking on the temptation with evaluating the performance of a composite insurance company like AIICO says it is to paint all our businesses with the same brush.
He said the company is made up of diverse businesses, some of which can be evaluated using common metrics. “Others, like our life business require some understanding about life insurance trends and the business model of the company being evaluated.”
“AIICO has a 54-year history as a life insurer, providing a variety of savings, investment-related and endowment products to our clients. Very often, these products are long-term in nature with some having tenors as long as 25 to 30 years. Profits are most often realized over time, from underwriting and investment operations. Some of our liabilities are also sensitive to interest rates, growing when interest rates decline and reducing when they rise. These movements are usually recognized on the income statement as “changes in unearned premiums” or “changes in life funds”. In our financial statements, we recognize these movements as changes in unearned premiums; this affects earned premiums.”
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“We can see that using the combined ratio, a short-term measure of performance, across the group ignores several key aspects such as the peculiar nature of our life business and the importance of investments to our operations. It also ignores the effect of interest rates on profitability in our life business, which represents over 60 per cent of our gross written premiums. In 2017, gross premiums earned in the life business reduced 25 per cent to N10 billion from N13.3 billion in 2016 despite the 5 per cent growth in premiums.”
“The benefits in our life business, which make up 76 per cent of total claims recorded in 2016 grew 44 per cent compared to 2016. This is because our life business is much larger today than it was in 2016. The timing of these benefits payments is largely predetermined based on the contract with our policyholders. This is another area where life and general insurance diverge – in non-life, the timing of these cash flows are uncertain. The importance of investments to our life business operations thus becomes apparent – we must invest the premiums efficiently to make sure we can meet our obligations. Investment income is therefore an important indicator of performance in a life insurer and trading in a volatile investment climate such as ours is not only recommended, it is wise.”
“In our general business, which consists of short term products and policies, combined ratio reduced from 122 per cent to 102 per cent comparing Q3 2016 to 2017. Our claims ratio also reduced in 2017 from 55 per cent in 2016 to 49 per cent.”
Meanwhile, AIICO Insurance Plc over the weekend won four of the prestigious Pearl Awards. The company emerged winner in two categories of the awards, the Sectoral Leadership Awards and the Market Excellence Awards.
Also, the company has promoted Wale Kadri to the position of executive director, Technical, in charge of general business awaiting regulatory approval. Until his appointment, Kadri was the GM, non-life business.
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