We are days into the month of March, a time when a vast majority of the nation’s corporations are expected to report their full year sales and earnings. In anticipation of expected results, the insurance sector has been forecast to improve fundamentals faster than inflation.
When industry fundamentals grow faster than the general price levels in a country, there is an indication of real growth in that industry as the value of profits made are not eroded by time. Stakeholders are also glad as higher dividends will be expected from these companies.
The country’s underwriters of risk listed on the stock market made a combined N17.96 billion in profits from a premium income of N189.54 billion as at September 2018, N3 billion less than the full year earnings of the 23 insurance companies in 2017. At this pace, the companies are set to earn close to N24 billion from an estimated premium income of N252.08 billion for the year ended 2018.
This puts the growth rate of both the forecast 2018 industry gross premium income and earnings at 18.43 percent and 14.48 percent when compared to 2017 performance, well above the full year inflation rate of 2018 at 12.14 percent. AIICO, Sovereign Trust Insurance and Prestige Assurance were the companies that had already outperformed full year earned premium income by the end of September 2018.
These companies were on track to grow premium income at the end of the 2018 financial calendar by an average of 40 percent. The insurance sector has in the past ten years achieved an average growth rate of 35.07 per cent in both life and non-life classes of business. A breakdown of this showed that life business recorded a higher growth rate of 27.64 per cent, while non-life grew by 7.43 per cent in the last 10 years.
Amidst economic challenges of the country, it seems the insurers are protected and weather the storm efficiently. Eddie Efekoha, managing director, Consolidated Hallmark Insurance in 2017 stated that insurance firms had to grapple with challenges of epileptic power supply and dilapidated infrastructure such as roads and other public facilities, all which according to him, exposed the industry to increased cost of operations.
According to Agusto & Co, the industry has satisfactory capitalisation ratios which are expected to further strengthen on the back of anticipated changes in capital requirements for operators across different segments, although it notes that a number of fringe players remain undercapitalised. The leading Pan African credit rating agency in Nigeria for over 26 years has assigned a “Bb” rating to the Insurance Industry in its newly published 2019 Nigerian Insurance Industry report.