PROFIT after tax for non-life insurers declined by more than half for the nine months ending September 30, 2015.
BY TATIRA ZWINOIRA
The profit after tax dropped by 58,43% to $3,65 million during the period under review compared to $8,79 million same period in 2014, the Insurance Pensions Commission, short term (non-life) insurance report for the third quarter has shown.
“The decrease in total profit after tax mainly emanated from an upsurge in unrealised losses in investments and an increase in net incurred claims which amounted to $3,52 million and $3,38 million respectively,” the report showed.
The statement explains that the increase in unrealised losses is mainly owing to the poor performance of the financial markets during the period under review.
In line with the decrease in profit after tax, the industry average return on assets (ROA) and return on equity of (ROE) deteriorated to 2,13% and 4,79% respectively from 5, 13% and 11,74% for the nine months ended September 30, 2014.
In the report, a total of seven insurers reported losses during the period under review.
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The non-life insurance sector did not generate enough income from its investments to supplement income from the core business of underwriting. This is evidenced by the ratio of investment income to net premium income which was a negative 0,72%.
“The failure to generate adequate income to supplement underwriting income compromised the sector’s overall profitability, given that underwriting profits were already being adversely affected mainly by significant increases in net incurred claims,” IPEC said.
As a result of increases in net incurred claims, underwriting profits decreased to $4,74 million from $6,67 million over the same time frame that ended September 30 2014.
Hire purchase and motor insurance remained the classes with the highest proportion of net earned premium devoted to settlement of claims and payment of commissions, evidenced by the two business classes’ highest loss plus commission ratio of 80,13% and 61,47%.
The insurance industry has witnessed a general decline in the uptake of insurance products and a growth in premium debtors, which amounted to 49% of the gross written premium up to the third quarter of 2015.
Insurance brokers and agents are set to be hit with value added tax on their commissions with insurance and reinsurance companies enforced last year at the beginning of September 2015.
