Stakeholders caution as Nigeria,ke Insurers’ liabilities outpace total assets for H1’2018

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Linkage, Wapic, Guinea lead negative balance AIICO, Mutual Benefit lead positive balance

By Rosemary Onuoha

The insurance industry total liabilities for the first half of 2018, H1’18, outpaced total assets compelling stakeholders to call for rebalancing and caution.

Analysis of companies performance for the first half of 2018 financial year, H1’18, show that while total assets grew by 8.6 percent at N622.1 billion from N572.7 billion in the corresponding period of 2017, total liabilities went higher by 10.4 percent to N391.6 billion against N354.7 billion in H1’17. insurance

The top five companies that were largely responsible for this trend are Linkage Assurance Plc, WAPIC Insurance Plc, Guinea Insurance Plc, Veritas Kapital Insurance and Sunu Assurance Plc.

With a whopping 50 percent increase in liabilities, Linkage Assurance recorded the highest figure in the sector as total liabilities stood at N5.1 billion against N3.4 billion in H1’17.

At just 9.4 percent the company’s growth rate in total assets, though above industry average, pales hugely below its liability growth rate. The total assets in H1’18 was N25.5 billion against N23.3 billion in H1’17.

Wapic Insurance total liabilities skyrocketed by 46.2 percent at N15.5 billion against N10.6 billion, while total assets increased by 16.8 percent to N33.4 billion from N28.6 billion.

Guinea Insurance came third amongst the negative balance growth rate with total liabilities ballooning by 34.7 percent at N1.3 billion in H1’18 against N965. 4 million in H1’17, while total assets went up by 17.9 percent to N4.6 billion from N3.9 billion.

Another huge jump in negative balance in growth rates was in Veritas Kapital whose total liabilities climbed by 30.4 percent to N3 billion against N2.3 billion while total assets edged up by just 6.9 percent to N10.9 billion against N10.2 billion.

Also Sunu Assurance’s total liabilities went up significantly by 29.6 percent to N9.2 billion against N7.1 billion while total assets increased by 13.2 percent to N12.8 billion against N11.3 billion.

But the industry has some positive balance growth recorded during the period which was led by AIICO Insurance Plc, Mutual Benefit Assurance Plc and Standard Alliance Insurance Plc.

AIICO’s was top as total assets went up significantly by 14.4 percent to N105.7 billion against N92.4 billion while total liabilities went up by 13.3 percent to N92.3 billion against N81.5 billion. Mutual Benefits’ total assets went up by 8.3 percent to 58.7 billion from N54.2 billion while total liabilities climbed by 8.2 percent to N50.1 billion against N46.3 billion. Standard Alliance total assets increased by 3.1 percent to N13.5 billion against N13.1 billion while total liabilities went up by 2.5 percent from N8.3 billion against N8.1 billion.

Speaking on the development, while some analysts said that the spending should be checked so that insurers don’t run into distress, others stated that the spending could be outflows expended on adoption of Information Technology, IT, as many companies are embracing IT as one of the many channels of products distribution to reach diverse markets.

However, the analysts worry that some players may not be growing assets as aggressively as they are incurring costs.

They worry that the indices could portend a negative move because as liability grows, insurers may be challenged with liquidity issues and there is the tendency that the capacity to meet up with obligations could be eroded.

Accordingly, analysts believe that the new tier based policy is a welcome development even though they are against the short time frame given to insurers to comply.

They noted that when the tier based policy becomes operational, operators will have the advantage to acquire manpower as well as the financial strength to meet obligations as at when due.

Stakeholders’ reaction Reacting to the development, National Chairman of New Dimension Shareholders Association, Mr. Patrick Ajudua, said that a higher percentage increase in liabilities against a lower increase in assets might not be a very good development for the insurance sector.

Ajudua said, “Insurance operators should be careful of their liabilities otherwise it will get to a point where they might not be able to cover risks adequately.

When you allow liability to continue growing, it means that you are bound to face liquidity problems. In the long run, you might lack the capacity to meet obligations, and when you can’t meet your obligation, you are as good as dead.

So the tier based policy will make operators concentrate on areas of strength so that they don’t run into crisis.” An insurance company chief executive who spoke on the condition of anonymity said that insurance companies are committing huge resources towards IT development, hence, the reason for the growth in liabilities.

“Companies are committing more towards IT development; however, it doesn’t mean that the companies are in distress. On the other hand, it could mean that some operators are not growing income as aggressively as they are spending.”

Other companies’ performance Great Nigeria Insurance total liabilities went up by 21.4 percent to N5.1 billion against N4.2 billion while total assets increased by 11.8 percent to N11.2 billion against N10.0 billion.

Cornerstone Insurance total liabilities climbed by 19.6 percent to N20.1 billion against N16.8 billion while total assets increased by 15.4 percent to N27.8 billion against N24.1 billion.

Axa Mansard total liabilities went up by 16.6 percent to N49.9 billion from N42.8 billion while total assets increased by 12.3 percent to N74.8 billion from N66.6 billion. Nem Insurance total liabilities went up by 11.5 percent to N8.7 billion from N7.8 billion while total assets climbed by 10.2 percent to N19.4 billion against N17.6 billion. Custodian Investment total liabilities inched up by 7.7 percent to N47.6 billion against N44.2 billion while total assets went up by N6.6 percent to N85.8 billion against N80.5 billion.

Niger Insurance total liabilities increased by 4.7 percent to N15 billion against N14.8 billion while total assets went up by 2.3 percent to N22.7 billion against N22.2 billion. Regency Alliance total liabilities went up by 5.7 percent to N3.7 billion against N3.5 billion while total assets inched up by 0.2 percent to N9.42 billion from N9.4 billion.

Lower liabilities over assets Sovereign Trust Insurance total liabilities declined by 15.1 percent to N4.5 billion against N5.3 billion, while total assets grew by 9.3 percent from N10.6 billion against N9.7 billion.

Lasaco Assurance total liabilities went down by 14.4 percent to N8.9 billion against N10.4 billion while total assets also declined by 5.9 percent to N17.5 billion against N18.6 billion.

Royal Exchange total liabilities decreased by 10.8 percent to N24.7 billion against N27.7, while total assets also went down by 9.6 percent to N30.1 billion against N33.3 billion.

Universal Insurance total liabilities went down by 5.8 percent to N3.2 billion from N3.4 billion, while total assets went up by 5.8 percent to N12.7 billion from N12 billion.

Prestige Assurance total liabilities declined by 4.7 percent to N4.1 billion against N4.3 billion while total assets went up by 0.8 percent to N11.9 billion against N11.8 billion.

Law Union total liabilities went down by 2.2 percent to N4.3 billion against N4.4 billion, while total assets increased by 4.8 percent to N10.9 billion against N10.4 billion.

Source: Vanguard

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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