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Insurers Q1 earnings dip over non-renewal of FG group life insurance

By BusinessNews Staff on May 18, 2015

Insurance companies’ first quarter 2015 earnings have fallen short of projection, reflecting a tough business environment and the impact of the country’s recently concluded general elections, which slowed economic activity and created uncertainty in the business environment, BusinessDay investigation has shown.

The insurance sector in Nigeria contributes barely 0.65 percent to GDP and less than 1 percent in penetration, making it the third largest in Africa with premium size of about N300 billion as at the end of the 2014 financial year.

Analysts who spoke to BusinessDay over the poor outing of most insurance companies in their first quarter results, said the non-renewal of the Federal Government’s group life insurance and police insurance scheme in the first quarter, significantly affected the premium size of companies and the industry.

The Federal Government’s group life insurance and the police insurance scheme account for nearly 10 percent of life insurance companies’ annual premium, and amounted to N9 billion in the 2013 financial year, with the FG employee scheme accounting for N5.7 billion and police scheme N3.7 billion.

As at April 30, 2015, twenty-six insurance companies out of 49 registered firms had submitted their first quarter 2015 accounts to the National Insurance Commission (NAICOM), which reflected low premium as a result of poor business environment during the review period, when compared with the same period in 2014.

An insurance CEO who preferred anonymity said no insurance company would meet its first quarter projection this yeas, as a result of poor business environment since the beginning of the year.

“The postponement of the elections affected us most, because that was the peak of insurance renewal for the current year.”

He added, “as soon as the elections were postponed many clients, both private and corporate, withdrew their interest and had to wait to see the outcome of the elections, and that affected our performance seriously.”

The CEO, however said normalcy was returning to the business following the successful and peaceful conduct of the general elections, adding that the NNPC had just renewed its group life and consolidated insurance assets this quarter.

“We are beginning to see business renewals now from individual and corporate clients and we hope we recover in the second quarter, to enable us meet our projection for the year.

The Federal Government, through its consultant broker, had late December, issued credit notes to insurance companies for its employees group life insurance for 2015, but had to withdraw them five days later when it became clear that government was not going to release money for premium payment at that time.

This however worsened when the political environment was heated up over electioneering, until now that a new government is coming in.

Tosin Runsewe, chief client officer, Mansard Insurance plc, had earlier in the year, expressed concern over declining government revenue over falling oil prices and depreciation of the naira, which he observed might affect premium income of insurance companies.

Also, Bola Temewo, president, Chartered Insurance Institute of Nigeria said there was no doubt that businesses had been facing hard times, particularly as the economy faced difficult times as result of dwindling oil prices, falling government revenues and depreciating value of the naira.

[Business Day]

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