Continental Reinsurance Plc has maintained an efficient underwriting capacity amid challenging macroeconomic environment as underwriting profit surged on account of a sharp reduction in claims expenses.
For the first six months through June 2017, Continental Re’s underwriting profit rose by 158.11 percent to N2.08 billion from N808.67 million the previous year.
The growth in underwriting profit was underpinned by a 33.49 percent reduction in net claims expenses to N3.51billion as insurance claims and losses under loss adjustment expenses recoverable from retrocessionaires reduced obligations to policy holders.
The insurer’s combined ratio (CR) fell to 80.79 percent in June 2017 from 92.34 percent the previous year, which means the insurer had earned more premiums than losses plus expenses.
Combined ratios are seen as a good measure of an insurance company’s financial health because they examine profitability only from the standpoint of the company’s insurance operations.
Continental Re, the largest privately-owned reinsurance company in Africa, has urged insurers to merge or consolidate in order to retain premium locally, take on more risk and compete with some of their peers in sub Saharan Africa (SSA).
According to Femi Oyetunji, the company’s group managing director of the company, Nigeria has 50 insurance companies; Ghana has 46; Kenya has 47. Oyetunji revealed that Mozambique has 18 insurance companies. Liberia with a population of only four million has 20 insurance companies.
Analysts agree that a scheme of mergers and acquisition can help shore up the capital of insurers as these firms have a very low valuation.
Furthermore, there is a widening gap between the big insurers and the small ones as the former make up nearly 90 percent of profit and market capitalization of the over 30 firms quoted on the floor of the Nigerian Stock Exchange (NSE).
“You still have the top six insurance companies owning and controlling more than 60 per cent of the market and that means the other 50 companies are not doing as much,” said Kabir Okunlola, head of the insurance audit group at KPMG.
Apathy towards insurance, weak regulations and economic downturn are holding back the growth of insurers operating in the country.
Despite these monumental challenges, Continental Re’s gross premium written was up 27.38 percent to N15.19 billion in June 2017 from N11.92 billion the previous year.
Similarly, gross premium income (GPI) increased by 7.15 percent to N12.69 billion in the period under review as against N11.85 billion in June 2016.
The second quarter premium income of NSE insurance 15, the most liquid insurance companies on the bourse, have risen in the period under review after 2 year of tepid growth that was caused by a sharp drop in oil price and a severe dollar shortage.
Experts have attributed the uptick in the revenues of these firms to increased purchase of insurance policy and improved economic activities as the country exited recession.
Further analysis of Continental Re’s financial statement shows net income dipped by 1.55 percent to N2.32 billion in the period under review as gains on foreign exchange slumped 88.89 percent.
The company’s operating expenses reduced by 25 percent to N532.28 million; underwriting expenses dipped by 15.11 percent to N5.23 billion as at June 2017.
Continental Reinsurance is the largest private pan-African reinsurer, outside South Africa, writing business in more than 50 countries across the African continent. Established in 1985, and listed on the Nigerian Stock Exchange (NSE) in 2007, Continental Reinsurance provides support to over 200 insurance companies in Africa with its main offices in Nigeria, Cameroon, Kenya, Côte d’Ivoire, Tunisia and Botswana.
BALA AUGIE
