ZIMBABWE’S insurance and reinsurance companies enjoyed a marginal growth in profitability in the first quarter of 2013 largely due to an increase in unrealised gains emanating from the marking to market of the investment portfolios coupled with a reduction in commission incurred, the latest Insurance and Pensions Commission (Ipec) report shows.
In its 2013 first quarter report, Ipec said total profit after tax for the non-life insurers increased from US$1 million for the quarter to March 31 2012, to US$3,31 million in the same period this year, despite a marginal decline in the volume of business written.
The insurance and pensions body said the increase in profit after tax for the sector translated into improvements in both the sectorial average return on assets and return on equity from 0,74% and 2,78% for the quarter ended March 31 2012 to 1,91% and 6,07% for the quarter under review respectively.
“Although the direct short-term insurers’ sector reported a positive overall profit position, five insurers namely Tristar Insurance Company, Regal Insurance Company, Altfin Insurance Company, Sanctuary Insurance Company and Eagle Insurance Company recorded losses during the quarter under review,” Ipec said.
Underwriting profits also increased from US$1,82 million for the quarter ended March 31 2012 to US$2,89 in the same period this year.
Despite the growth in underwriting profits, the average combined ratio for the non-life insurers increased from 82,63% between January and March 2012 to 88,20%, with Ipec saying it is a reflection of deteriorating profitability of the insurers’ core business — underwriting.
“The deterioration in underwriting profitability is further indicated by the decline in underwriting margin from 17,37% for the quarter ended 31 March 2012 to 11,80% for the quarter under review,” Ipec said.
Ipec also noted a marked increase in claims which resulted in the deterioration of the loss ratio from 34,51% to 42,04%. Investment income accounted for only 3,73% of net premium written (NPW) indicating that the short-term insurers are generating the bulk income from their core business of underwriting.
In an update on trends of business, Ipec said for the first time since the inception of the multi-currency regime, non-life direct insurers witnessed a shrinkage in the volume of business with the marginal decrease of 0,30% in total gross premium written from US$66,88 million reported for the quarter ended March 31 2012 to US$66,68 million for the quarter ended March 31 2013.
Ipec said the slump in gross premium was mainly attributable to the decline in business generated from hail insurance from US$4,19 million for the quarter ended March 31 2012 to US$370 000 for the period under review.
Motor and fire insurance remained the dominant sources of business with combined gross premium written of US$42,15 million for the quarter under review. The two business classes accounted for 63,22% of total gross premium written.