United Capital Metropolitan Life Insurance Ltd’s deteriorating underwriting performance has taken its toll on profitability as the insurer recorded a loss to end 2016 financial year.
The insurer’s slow premium growth and rising expenses also contributed to the unimpressive performance.
For the year ended December 2016, United Capital Metropolitan Insurance recorded an underwriting loss of N583.13 million from a N33 million loss it recorded as at December 2015.
Also, combined Ratios (CR) was 146 percent in the period under review, one of the highest in the insurance industry.
The combined ratio is a measure of profitability used by an insurance company to indicate how well it is performing in its daily operations.
The combined ratio is calculated by taking the sum of incurred losses and expenses and then dividing them by earned premium.
The ratio is typically expressed as a percentage. A ratio below 100 percent indicates that the company is making underwriting profit while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.
A breakdown of the CR or operating ratios of the Nigerian insurer showed while claims remained flat at N1.20 billion, claims ratios or loss ratios increased to 70.20 percent in December 2016 from 65.10 percent as at December 2015.
The high level of claims accentuates the low level of premium, poor underwriting standards, poor claims control or a strong reserve basis.
The insurer has incurred more expenses in writing claims as underwriting expense ratio increased to 75.80 percent in the period under review from 50.61 percent as at December 2015.
South African life insurer MMI Holdings acquired full ownership of United Metropolitan Nigeria Life Insurance after purchasing the 50 percent stake from United Capital Plc.
Experts are of the view that such a joint venture arrangement is expected to strengthen the Nigerian insurer’s balance sheet while additional could be invested in latest technology, man power and market penetrating products.
Analysts at Chapel Hill Denham Limited in their 2017 report on the insurance industry forecasts Life Insurance to growth by 12.10 percent between 2015 and 2025.
The investment house said its forecast of the industry life premium income is based on its assumed population growth of 3.0 percent per annum.
“We estimate density (Consumption per capital) will rise by 8.10 percent per anum at N1,368 by 2025E, indicating a possible 2.60 times expansion of life insurance premium of life insurance premium income to N320.68 billion,” said analysts at Chapel Hill Denham.
United Capital Metropolitan Life Insurance recorded a loss after tax of N81 million December 2016 from a profit of N563 million as at December 2015.
Nigerian insurer’s gross premium income remained flat at N2.08 billion in the period review while net premium income fell by 7 percent to N1.71 billion in December 2016 from N1.84 billion as at December 2015.
BALA AUGIE
