Better days ahead! Insurance firms see big profits amid crises in 2020

·        Prestige, Linkage, Consolidated Hallmark swim in high earnings

Zainab Iwayemi

The Nigerian insurance industry, for the first time in a long while, appears to present a clearer atmosphere, offering stakeholders an opportunity to have a good glance into what experts see as the bright future ahead for insurance in the country.

A study of the financial statement of insurance firms for the year 2020 made available on the Nigerian Stock Exchange (NSE) has shown that insurance companies could be poised for the long expected take off as many underwriters, in spite of the year’s crises, showed resilience in their financial performance, undermining the global pandemic and the nation’s protests, which led to restrictions on much economic activities, as well as distorted the economy.

Many insurance firms, during this period took the bull by the horn by demonstrating the real meaning of insurance, which is serving as a tool for a rebound in times of crises, through payment of claims to policyholders and to victims of looted assets whose businesses were affected by the crises.

Overcoming the crises

Towards the end of the first quarter last year, the federal government announced a total lockdown of economic activities to curb the escalating virus. Since then, the lockdown was continuously extended leading to a pause in education, trade, and many significant activities, as well as sectors vital for the nation’s growth.

During this period, organisations, in order to keep the ball rolling, resorted to remote working. As insurance firms joined the league, they soon adopted innovation and digitization which abetted the long term possibility projection of significantly increasing communication with customers using technology.

According to a report by KPMG, eighty-five percent of insurance CEOs agreed that COVID-19 has accelerated the digitization of their operations and the creation of next-generation operating models.  Seventy-eight percent said that it has turbocharged progress on the creation of a seamless digital customer experience and 79 percent consented that it has brought new urgency to the creation of new business models and revenue streams.

Conspicuously, the situation surrounding COVID-19 provided an opportunity for insurers to rethink and innovate as they adjust and respond to the crises which made it clear that insurance, like other products offerings, could be personalized with communications being on a more segmented basis. Through harnessing the power of technology – insurtech – in tailoring messages and offerings to customers, insurers are able to provide a better experience for customers in the form of customized effort and targeted price at the right time.

This is better appreciated in the audited 2020 financial reports which revealed that many insurance firms recorded a surge in profit compared to the previous year. For instance, Prestige Assurance, during the fiscal year 2020 delivered 57 percent profit (N246 million) alongside an improved gross premium written of 14.4 percent, while Linkage Assurance Plc. also recorded profit after tax (PAT) up to 65 percent, coupled with a 102 percent improvement in underwriting profit while its gross premiums written was increased by 28 percent.

Similarly, Consolidated Hallmark Insurance saw a surge in profit by 13 percent (N678 million) while its gross premiums grew by 12 percent to reach N9.78 billion; and Sunu Assurances recorded a rise in gross premium written by 37 percent (N1 billion) as a group and 46 percent (N1 billion) as a company while its profit after tax, as a group grew by N237 million depicting a 5.3 percent surge.

In addition, AXA Mansard reported a total of N4.5 billion as a group for the year 2020, an amount which represents a 56 percent surge compared to the N2.9 billion it recorded in the previous year. But the life and non-life insurance firm as a parent group, dropped in profit by 49 percent against the previous year’s.

Speaking on the improvement, Prestige Assurances in a note stated that the improvement is not untied to its effort to meet up with trends and the adoption of digitization “We have continued in our efforts to reduce the use of paper in our general operations. The use of e-mails, workflows, portals and other e-channels is encouraged as work tools for members of staff. Information to customers is sent electronically via text, phone calls and e-mails,” It noted.

Also, Linkage Assurance stated in its note buttressing the financial performance: “Notwithstanding the irrepressible impact of COVID-19 pandemic on economic landscape, the company remained resilient as profit before tax and profit after tax grew by 89 percent and 65 percent to N2.5 billion and 2.4 billion respectively”.

While most insurers rebounded during the period of crises, few underwriters were affected greatly as they recorded a dip in profit. A case in view is AIICO Insurance and Regency Alliance. As a group, AIICO  slipped in profit by 13 percent (N738 million) despite a surge in gross premiums written by 24 percent (11 billion) while Regency Alliance Insurance Plc shrank profit by 17 percent (N126 million) as a group and also slipped by 3.2 percent (N21 million) as a parent company.

Commending insurance firms for a job well done, experts have lauded the underwriters for their relentless effort in driving the insurance penetration rate which at the moment is below one percent.

“It simply means the insurance industry has learned how to explore the opportunities that appear amidst crisis and attuned themselves to best financial reporting standards. Generally, financial services providers have reported positive results, why not insurance? The insurance industry continues to be tested and has proven to be ready to adapt,” said Ekerete Ola Gam-Ikon, a consultant in insurance management and strategy said in a note to Business A.M. while commenting on the performance of the insurance firms.

Meanwhile, those familiar with insurance matters have opined that insurance firms that were greatly affected by the year’s crises might have to use a different approach in line with technology and digitization so as to level up with others. “They should take advantage of the emergent tech and digital solutions which can actually give them an edge over their competitors,” Gam-Ikon advised.

Insurance firms have in recent times been geared towards upgrading product offerings through innovation and digitization to reach businesses, households, and organisations. Axa Mansard recently launched a Business Insurance Plan (BIP) to cover small and medium-sized businesses.

Also, experts, regulators and stakeholders have organised conferences, webinars and events directed at spreading insurance. Expectedly, insurance in Nigeria would soon begin to match up with insurance in Africa and the rest of the world.