Aiico Insurance high claims ratio favours policy holders


AIICO Insurance Plc high claims ratio is favourable to policyholders as they will be successfully receiving payouts despite low penetrations.

For the first six months through June 2015, AIICO’s claims ratio increased to 71.81 percent from 22.02 percent the previous year.
This means for every N100 generated in sales, the company pays N71.81 in claims.
Claims expenses spiked by 105.73 percent in the review period to N5.02 billion from N2.44 billion

the previous year.

AIICO’s claims ratio in the period under review is higher than Mutual Assurance Plc 27.43 percent payout ratio, Consolidated Hallmark’s 19.13 percent, and Equity Assurance’s 20.23 percent, based on data compiled by Businessday.
The company’s claims ratios are also higher than its expense ratio of 62 percent which means the Nigeria insurer is settling policy holders more than it is spending more on operating expenses.
Operating expenses reduced by 9.87 percent to N4.38 billion in June 2015 as against N4.86 billion as June 2014. Underwriting expenses were down by 15.42 percent to N1.81 billion in the period under review compared with N2.14 billion last year.
Analysts say the growth in the Nigerian economy and the policies of the regulators will spur AIICO insurance to growth.
The new auto policy and the No Premium No Cover policy imposed by the regulator will also be a major driver of premium income of insurance firms in Africa largest economy and most populous nation.
AIICO’s gross premium written increased by 11.08 percent to N16.23 billion in June 2015 as against N14.61 billion the previous year. Gross premium income fell by 31.96 percent to N8.81 billion in June 2015 as against N12.95 billion as at June 2014.
AIICO will have to improve on underwriting capacity as net premium income reduced by 36.71 percent to N6.98 billion in the period under review compared with N11.03 billion the previous year. Underwriting income jumped dipped by 36.41 percent to N7.42 billion in June 2015 as against N11.67 billion as at June 2014.
The Nigeria insurer will have to improvement on its loss experience as a way of boosting underwriting income.
The Nigeria insurer’s net income succumbed to the tough operating environments crimping growth of companies as net income reduced by 30.98 percent to N779.91 billion from N1.13 billion last year.
Despite paying claims out of revenues than operating expenses, AIICO bottom line got tempered by huge energy costs incurred in running plants as the factories.
The company’s total assets increased by 28.10 percent to N66.54 billion in June 2015 compared with N51.94 billion in June 2014. The growth in assets was driven by an 81.10 percent increase in financial assets to N7.62 billion in the period under review from 26.22 billion last year.
AIICO’s share price closed at N0.81 on the floor of the exchange while market capitalization was N5.54 billion.