Non-life insurers’ earnings fall by 40 percent

Non-life insurance firms registered a 38.95 percent decline in profit after tax in the first quarter of 2016, writing a lower volume of business as economic activity continues to slowdown, an industry regulator’s report shows.

According to the Insurance and Pensions Commission’s (IPEC) report for the quarter to March 31 2016, the non-life insurance sector’s total profit after tax amounted to $2.39 million, compared to $3.92 million in the same period of 2015.

“The decrease in the profit after tax was mainly attributable to decrease in business volumes. In addition investment income which was considered low to supplement underwriting income was shrinking,” IPEC said.

“The decrease in the volume of business translated into a deterioration in the industry average return on assets (ROA) and return on equity of (ROE) from 2.16 percent and 5.05 percent for the quarter ended 31 March 2015 to 1.25 percent and 2.89 percent respectively, for the quarter under review.”

The volume of business written by the non-life insurance industry declined by 6 percent, with gross premium written (GPW) for the quarter being $66.59 million, down from $70.89 million in the first quarter of 2015.

“The shrinkage in the volume of business was mainly driven by declining business generated from fire and motor insurance. The decrease in business written could generally be attributable to the slowing down economy since the insurance industry performance usually follows the fortunes of the economy,” IPEC said.

Fire and motor insurance makes up the bulk of short-term insurance business, accounting for 37.14 percent and 23.1 percent of the sector’s total GPW, respectively.

While all 20 registered short-term insurers meet the current minimum mandatory capital level of $1.5 million, only 9 of these are above the soon to be gazetted $2.5 million capital threshold.

IPEC has also raised the possibility of some insurers including non-admissible assets in calculating their capital levels.

“However, the capital positions reported do not account for non-admissible assets. The Commission will be issuing a Statutory Instrument that operationalises the recently increased minimum capital requirements of $2.5 million and deals with admissibility of assets in due course,” IPEC said.

The quarterly report shows Old Mutual’s insurance arm’s continued dominance of the market, with 18 percent of GPW and 17 percent of assets.

In the GPW rankings, Cell Insurance follows Old Mutual, with Zimnat Lion, Nicoz Diamond, Alliance, Eagle, CBZ Insurance, Champions, Tristar and Clarion completing the top ten in that order.

In terms of market share by assets, Alliance comes second after Old Mutual with 14.74 percent, edging Nicoz Diamond (14.21 percent) into third place. Zimnat Lion (9.71 percent), Cell (7.63 percent), Eagle (6.53 percent), CBZ Insurance (4.91 percent), Champions (3.37 percent), THI (3 percent) and Tristar (2.7 percent) completing the top ten.- The Source

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