Inflationary trends on claims and insecurity in Nigeria’s North-east and South-south regions are taking their tolls on operations of insurance companies in the country, according to Cornerstone Insurance Plc.
The company, which rode on the back of its retail market to increase its share of business in the Nigeria’s insurance market lamented that inflation and upward swing in claims portfolio as well as insurgency in the country’s North-east and South-south regions have impacted negatively on its bottom line.
The company’s gross claims for the 2016 business year rose by 61 percent to N4.5 billion when compared with the previous year’s N2.8 billion, which it attributed largely by death claims from the group life, credit life and third party motor classes of insurance.
Despite the above challenges, Cornerstone Insurance Plc Thursday announced a 25 percent growth in gross premium for the business year ended December 31, 2016.
Segun Adebanji, group chairman, told shareholders gross premium written rose to N9.1 billion in the review period as against N7.3 billion in 2015.
He said sales to retail customers accounted for 25 percent of premiums while special risks products to the oil & gas and Engineering sectors contributed the second highest proportion at 23 percent.
The chairman said the increased financial strength from the conclusion of the acquisition of Fin Insurance and their growing reputation as a credible partner is now opening the opportunity for leadership position on major transactions as well as provide support for our retail expansion.
The group total asset grew to N21,436,369 billion in 2016 as against N20,968,781 billion reported in same period of 2015.
Net investment income increased by 98 percent from N.74 billion in 2015 to N1.47 billion in the year under review mainly due to the consolidation of the investment income of the subsidiary.
Unlisted equities portfolio he said suffered significant impairment while the financial commitment on its new head office building constrained the liquidity that would have benefited from attractive yields on short-term instruments.
Similarly, rising cost of goods and services, coupled with the first-time consolidation of the operations of the subsidiary, led to a 45 percent increase in management expenses.
“Significant investments are being made in improving the technology and distribution infrastructure to support the company’s retail strategy. Agency network almost doubled from 832 to 1,600 agents while a robust platform has been built for the rollout of the bancassurance channel.
“These costs are being accounted for in the current financial statements, we expect the benefits to accrue over several accounting periods.”
On the company’s future outlook, the chairman said: “Even though the country is not out of recession yet, the early signs give cause for cautious optimism that the worst may be over and economic activity may begin to improve.”
He said the full effects of the government’s plans would have trickled down by the second half of the year and economic activity is expected to pick up by then.
On the industry he noted that the prospects for the insurance industry are slightly positive with potential for moderate growth.
By KELVIN EGERUE