Yemisi Izuora
The future is looking brighter for Nigeria’s leading Insurance underwriter, AIICO Insurance Plc, whose financial statements for 2017 indicates the company strengthening its strategies to consolidate recorded gains and building a stronger future.
Releasing its financial statements in Lagos on Wednesday, the company disclosed that its gross premiums for the year ended December 31, 2017, grew by 19 per cent to hit N32.1 billion compared to N27.06 billion for the year ended December 31, 2016.
This showed an increase of N5.03 billion which analysts consider a big feat considering the harsh economic environment and coupled with effect of recession.
Diluted earnings per share for the year were 13 kobo per share, down from 105 kobo per share in 2016.
Commenting on the result, the company’s managing director and chief executive officer, Edwin Igbiti, said, “We experienced significant growth as a company in 2017. We had to significantly increase our capacity and improve our processes to meet up with customer demands. Over the next few years, we have plans to grow our businesses; this means we must invest in technology and people to ensure our processes are more efficient to increase customer service levels.”
The company also improved its performance in the life business as its life business grew 15 per cent from N18.8 billion to N21.6 billion in 2017, largely driven by the increased popularity of its traditional life products, while the ordinary life business grew 29 per cent in 2017 to N16.4 billion from N12.8 billion in 2016.
The result showed growth in the company’s non-life business from N7.6 billion in 2016 to N8.7 billion in 2017, (c. N1.1 billion or 15%), due to improved relationships with agents, brokers and various intermediaries that helped to improve performance.
The company further noted that a change in how premiums in its health management subsidiary are recognized – premiums from some capitated plans, previously unrecognized in the income statement were recognized in 2017 and the impact of this change was c. N1 billion.
“Gross premium income reduced 29 per cent or N8.7 billion in 2017 to N21.3 billion from N30 billion in 2016. For insurance companies, premiums are recognized as income when they are earned. Therefore, the difference between gross premiums written and gross premium income (gross premiums earned) is the change in policyholders’ liabilities or reserves (reflected as change in unearned premiums balance for accounting purposes) with the total policyholders’ liability reflected on our balance sheet through the insurance contract and investment contract liabilities line items.
For AIICO, especially in our life business, the company books the premiums in Gross Premiums Written and deducts the transfer to policyholders’ liabilities or reserves. The result is Gross Premium Income. The transfers to policyholders’ liabilities or reserves are based on an increase/decrease in the total valuation of our cumulative book of insurance and investment contracts”, the statement said.
The company explained that the reduction in gross premium income in 2017 was largely due to the increase in the size of policyholders’ liabilities in our life business – Life contract liabilities grew by N9.95 billion in 2017 compared to a decline of N3.7 billion in 2016, adding that this was caused by growth in the business that led to reserves of N5.0 billion to be set up for new business acquired in the year and a decline in the yields from long-term government bonds that led to a decrease in interest rates used to value these liabilities resulting in an increase in policyholders’ liabilities of approximately N4.0 billion, which includes interest rates used to value the non-annuity policyholders liabilities declined to 13.75 per cent per annum in 2017 from 15.6 per cent in 2016 and interest rates used to value the annuity policyholders liabilities (PENCOM regulated annuities and others) declined to 13.5 per cent per annum in 2017 from 15.5 per cent per annum.
The company’s gross claims increased 55 per cent to N23.3 billion from N14.9 billion in 2016 which was attributed to the increase in benefits payments in the life business, while benefits payments grew N6.1 billion or 53 per cent to N17.6 billion in 2017.
“Our life business is dominated by contracts with our clients that stipulate payouts at pre-determined times. It is therefore logical that as the business grows, payouts grow accordingly. Critical activities are cash and investment management, two activities that we keep a very close eye on.
Claims in the non-life and health management increased by N1.1 billion each due to the recognition of capitated premiums. These premiums are paid out directly to hospitals and are thus recognized as claims. In the non-life business, our net claims ratio increased marginally in 2017, from 37 per cent to 42 per cent.
As a company, we realize that we exist, not just to create wealth but to provide protection for our clients in return for premium payments. We, therefore, expect that as the company continues to grow, claims expenses will grow accordingly. The importance of investment operations is thus quite clear”, the company said.