Niger Insurance gets swallowed by its own expenses

Niger Insurance Plc has had copious operating and underwriting expenses swallow most of its revenues, leaving the company with very low profit margins.

The burden is becoming heavier as the company’s total operating and underwriting expenses of N10.12 billion is 102.02 percent of net underwriting income and 91.50 percent of Gross Premium Income, culminating in low profit margins of 6.23 percent.

Quoted insurance companies in Africa’s largest economy are faced with these uphill expenses that wipe off most of revenues as 8 firms tracked by BussinessDay showed the same trend.

This explains the very weak share price of Niger Insurance.

The Nigerian insurer’s share price has been stagnant at N0.50 since its sharpest rise to N0.91 in 2011.

Analysts have suggested mergers and acquisitions among insurers as way of consolidating their market value, make them more competitive on the global arena and reposition them for better contribution to the Nigerian economy.

The last rebased Gross Domestic Product (GDP) exercise showed the insurance sector contributed less than 1 percent to Nigeria’s $510 billion economy.

This is abysmally low when compared with insurance’s 15 percent contribution to South African GDP and 3.40 percent contribution to Kenya’s $53 billion economy.

For the year ended December 2014, Niger Insurance net income increased by 10.11 percent to N690.96 million from N627.42 million the previous year.

Gross premium written (GPW) increased by 5.93 percent to N11.06 billion as against N10.44 billion.

Niger insurance underwriting capacity was inefficient as gross premium income decreased by 1.04 percent to N10.53 billion from N10.64 billion. The drop in gross premium was due to a sharp rise in unearned premium.

Underwriting profits were down by 35 percent in the period under review as the company continues to grapple with increased claim and underwriting expenses.

Underwriting expenses grew by 22.0 percent to N6.81 billion in 2014 compared with N5.55 billion in 2013. Management expenses were up by 29.27 percent to N3.31 billion in 2014 as against N4.68 billion in 2013.

The company’s total assets reduced by 6.40 percent to N22.79 billion in 2014 from N24.75 billion the previous year and market capitalization was N3.87 billion.