Nicoz Diamond Insurance Limited says the business environment continues to be tough, characterized by increased liquidity challenges, increase in claims, downward pressure on premium rates and reduction in covers. Resultantly, total revenue for the sector was down 6% in the first quarter of 2016. However the company managed to increase Gross Premium Written by 3% to $13 mln as at May 2016.At group level, premiums were close to $18 mln.
Giving a trading update at the company’s AGM, Managing Director, Grace Muradzikwa said the company’s focus area is to maximize its reinsurance program in order to minimize costs of re-insurance.
“We continue witnessing a shift to quality as policyholders seek for secure and strong insurance companies with a claims paying ability track record like ourselves”, she said
“Though the retentions were good at 71% compared to 62% of 2015, the company participated in a few new big risks in June 2016 which required high reinsurance”, she said
According to Muradzikwa, retentions have since gone down to the expected range of 60-65%, which was above the market average of 54% as at the first quarter. The company aims to improve on these retentions so as to boost profitability and in order to do so, underwriting capacity will be enhancement through further strengthening of the balance sheet.
Muradzikwa noted the loss experience at 52% vs. 42% in 2015, saying that this was of “concern” to the company, which had been “unfortunate enough” to process significant claims in the period under review.
Claims amounting to $4mln were processed with a couple of claims of around $500 000 each.
Expenses ratio went down 30% in 2016 compared to 38% in May 2015, and Muradzikwa said operating expenses management will continue.
“Being aware of the fact that regulatory and related changes made in 2016 increased the cost of doing business for the sector and the company in particularly by almost 8%, the company worked hard to reduce the costs by 5% as at May 2016”, she said
In terms of underwriting profitability, the company is currently in line with budget expectations and above that recorded for May 2015. To facilitate ease of payments, the company installed point of sale machines throughout its branches nationwide in addition to mobile transfer payment options.
“The challenge is to ensure that all those premiums not yet collected are collected in full amidst the liquidity challenges”, he said
Good rental yields are being obtained from the completed phase of Diamond Villas. The final phase of the project was resumed in May and completion is expected by September 2016.The company will maximize on rental returns as demand for sales has been low given the limited and expensive mortgage facilities in the market.
On regional investments, Muradzikwa said these were doing well though exchange rate fluctuations in the various markets have been a threat to profitability in real terms. Muradzikwa said the company will explore ways of exiting Uganda as the operating environment has been found to be very “difficult to navigate” and shareholders will be updated by year end.
Looking ahead, Muradzikwa said although the outturn of 2016 cannot be committed to with certainty, effort will focus on sustaining the current profitability recorded to year end.
Directors’ fees of $89 260 were approved for the year as well as auditors fees of $95 517. At the meeting, shareholders approved the appointment of James Karidza as chairman of the board. He took over from Albert Nduna who resigned from the board following his retirement at Zimre Holdings. Karidza has been with the Nicoz board for the past 5 years and chaired the Investments Committee Board.