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Life companies report drop in profitability in H1 after increase in claims

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Life Assurance companies saw a 12% growth in Gross Written Premiums to $180.39 million for the six months to June but a growth in total costs and claims saw profitability drop 26%.According to the Insurance and Pensions Commission report for the life industry for the six month period, life companies wrote $177 million in net premiums, an increase of 12% from last year’s $158 million. Total costs were up 29% to $140 million from $109 million fueled by high claims.  Net claims were up 47% to $101.47 million.

The industry’s combined ratio grew to 79% and a technical profit of $37 million was reported from $49 million last year.

For the life assurance industry made up of 11 companies, net premiums increased to $173 million from $154 million, a growth of 54% mainly drive by the fund business and group life assurance income streams. In the period, business continued to be concentrated around the three biggest insurers who wrote $144 million or 83% of the business.

Fund business, funeral, group life assurance and other policies constituted 88% of GPW. “This suggests weak financial capacity and awareness of other product lines. The spectrum of products continued to be traditional middle-to-top class products which may not be readily affordable to the general policyholder especially the informal sector”

Life companies paid $100 million in net claims, a 47% increase on last year. “The industry generally reported timeous settlement of claims. However players must be cautious in order to manage fraudulent cases pursuant to recent press reports for Old Mutual and First Mutual among others,” said IPEC.

For the period under review, players reported premium debtors amounting to $7 million against a gross premium written of $176 million implying an average premium collection rate of 96 percent.

Operational costs for the half year accounted for 21 percent of total costs while commission costs made up the balance of six percent.  Resultantly, the combined ratio spiked from 69 percent in 2015 to the current 78 percent mainly due to the ballooning claims bill.

During the period, life assurance players were invested in properties ($545 million), equities (-$347 million), money market (-$199 million), cash assets (-$15 million).

“Subscription to prescribed papers followed extensive industry engagements as well as imposing statutory penalties on non-compliant players,” said IPEC.

Except for one new player, the industry was adequately capitalized as prescribed by Statutory Instrument 21 of 2013.IPEC said further engagements with GetSure are on-going with a view to restore compliancy

During the period, reinsurers wrote $3,5 million in net premiums, which is a 20 percent decline from $4,4 million reported in the same period last year.

IPEC said this may be a result of reduced effective demand locally and therefore players must increase bias towards regional and international sources of business for enhanced sustenance.

As at the reporting date, reinsurers were adequately capitalized except FML Life and Health. It however merged with First Mutual Property and Casualty.

The reinsurance players reported capital to liability and liquidity ratios of 123 percent and 148 percent signifying strong capacity to meet critical obligations such as claims on demand.

Total industry assets shed 7% to $1.48 billion while total liabilities fell to $1.25 billion resulting in free assets of $233 million. – Report available on request

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