African Alliance Nigeria Plc has shown strength in the third quarter of 2015 as premium income surged, an impressive results that means the insurer is increasingly using innovative products to tap into the country’s market.
For the first nine months through September 2015, African Alliance net premium income increased by 30.28 percent to N10.81 billion from N8.29 billion the previous year.
The firms gross premium income also spiked by 30.40 percent to N10.81 billion amid low premium penetration.
African Alliance is aggressive about the payment of claims to policy holders as loss ratio increased to 38.29 percent in 2015 as against 20.38 percent in 2014.
This means for every N100 the company collects, it pays N38 in claims.
The stellar performance of African Alliance is coming amid low premium income caused by a slow economy and a weak naira. Nigeria’s economy has been grappling with a significant fall in price of oil.
Industry experts posited that insurers in Africa’s oil producer especially those that maintain portfolios weighted to oil and gas segment felt the pressure from decline in oil prices. These uncertainties resulted in lower premium revenue.
Also stifling the growth of insurance business in Nigeria are culture, religious beliefs, lack of trust for insurance, high level of poverty and unemployment.
The weak consumer spending evidenced by economic lethargy means many people prefer to spend the little money they have in their pockets on food than buy insurance.
However, analysts believe there is light the end of the tunnel for insurance companies as the reforms rolled out by National Insurance Commission (NAICOM) will be a major driver of growth for the sector.
Such reforms will repose investor confidence in a sector whose contribution to the country’s GDP is less than 1 percent.
The Abuja based insurance body has introduced the ‘No Premium No Cover policy. The policy is to enable insurers have a better and attractive balance sheets with strong reserves to meet commitments and obligations.
NAICOM also enforced rules requiring companies with at least five workers to provide life coverage. It is also making property insurance mandatory in the nation of more than 170 million people.
As a result of the rising claims payments, huge changes in contract liabilities and increased operating expenses, African Alliance net income fell by 82.66 percent to N143.40 billion in 2015 from N824.66 billion in 2014. Underwriting profits were down by 55.61 percent to N759.03 billion.
The Nigeria insurer’s operating expenses increased by 20 percent to N1.80 billion in 2015 as against N1.50 billion in 2014.Underwriting expenses moved by 31.68 percent to N1.01 billion in the period under review.
The 47.64 percent combined ratios, which is lower than the 100 percent threshold; means there are no threats to the going concern of African Alliance. The figure also means the company has a strong financial health while meeting its strategic objective of maximizing the value of shareholders.
BALA AUGIE
