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Insurers register profit slump

ZIMBABWE’S 25 non-life insurers registered a 16,36% slump in after tax profit for the nine months to September 2014 to US$8,79 million compared to US$10,5 million in the same period prior year, latest statistics show.

Taurai Mangudhla

The decrease in profit after tax was mainly driven by a US$4,37 million surge in operating expenses as well as a US$2,07 million increase in net incurred claims, according to the Insurance and Pensions Commission (Ipec) Short Term Non-Life third quarter report for 2014.

“Notwithstanding the overall profitability of the non-life insurance industry as a whole, a total of four non-life insurers reported losses during the period under review,” reads part of the report.

Ipec says in line with the decrease in after tax profit, the industry average return on equity and return on assets deteriorated significantly from 17,72% and 7,01% in the same period in the comparative prior year period to 11,74% and 5,13% respectively for the nine months ended 30 September 2014.

“Underwriting profits deteriorated from US$7,18 million for the nine months ended September 30 2013, to $6,67 million for the period under review mainly owing to an increase in operating expenses,” Ipec says.

“The deterioration in underwriting profits is also confirmed by the increase in the combined ratio from 90, 76% for the nine months ended 30 September 2013 to 92, 16% for the period under review.”
Ipec says net claims incurred by non-life insurers for the period under review amounted to US$35,2 million of which US$32,72 million was actually paid to the respective policyholders.

This translated into a loss ratio of 41, 37% which shows an improvement from 42,69% which was reported in the comparative period in 2013.

“However, the improvement in the loss ratio was not enough to offset the deterioration in the expense ratio from 42,83% to 44,20%, hence the deterioration in the combined ratio,” the regulator says.

Of all the business classes, motor, engineering and personal accident insurance reported the highest loss ratios of 45,18%, 44, 34% and 36,64% respectively.

The ratio of investment income to net premium written during the period under review was 13,53% and considered by Ipec to be too low with the effect of exposing players to the risk of failure to honour obligations without adverse effects on their capital should the combined ratios be in excess.

Total assets for direct non-life insurers continued on a downward trend, a trend which started on March 31 2014. During the quarter under review, the total assets declined by 2,77% from US$176,24 million as at 30 June 2014 to US$171,37 million as at 30 September 2014.

Ipec says the decrease was mainly owing to written off premium debtors as well as deferred acquisition costs net of unearned commission reserves from US$40, 19 million and US$6,93 million as at 30 June 2014 to US$33,6 million and US$4,13 million as at 30 September 2014 respectively.

“It has also been observed that premium debtors have over the years been generally on the downward trend from March 31 to September 30. By implication, it could thus be concluded that the downward trend could be attributable to writing off of premium debtors that will have proven uncollectable as the year progresses,” says the regulator.

“On the other hand, when insurers renew their annual policies in the last quarter as well as the first quarter of each year, there is a tendency to build up assets in the form of deferred acquisition costs net of unearned commission reserves from the renewed policies. As the same policies run through their annual terms, the deferred acquisition costs net of unearned commission reserves balances also run down, hence the general decrease in total assets for the periods from March 31 to September 30.”

According to the Ipec, Life Report for Life Assures for the period ended September 2014, life companies wrote US$218 million in net premiums, a 17% growth from US$188 million realised in the same period last year.

Expenditure grew by 18% from US$141million to conclude the current reporting period at US$167 million resulting in a US$52 million technical profit, up from US$47 million in the same period prior year.

Total assets for life assurers grew by 12% from US$1,46 billion last year to US$1,67 billion in the current reporting period.

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