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Insurance Firms Spend N377.87bn As Management Expenses

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The 56 Life and Non-Life insurance companies in the country have spent N377.87 billion on management expenses in six years, LEADERSHIP learnt.

This translates to about N63 billion annually spent on the management of underwriting firms across the country, even as the sector had only twice declared above N300 billion Gross Premium Income between 2012 and 2017 financial year.

In each of the six years, as LEADERSHIP findings reveal, the industry has spent above 20 per cent of their premium income on its managements. The expenses includes: underwriting expenses; salaries; rent; among others, excluding commissions paid to agents.

A data sourced from the umbrella body of insurance operators, the Nigerian Insurers Association (NIA), disclosed that, in 2012 financial year, N48. 22 billion was incurred on management expenses, N48.59 billion in 2013; N52.12 billion in 2014; N53.83 billion in 2015, N88.21 billion in 2016 and N86.9 billion in 2017, thereby, bringing the total spent as management expenses to N377.87 billion in six years.

In 2017 financial year, however, LEADERSHIP investigation revealed that most of the top 10 insurance companies’ management expenses have enough buffer in their respective premium income to cushion the effect of such expenses on their balance sheet.

For instance, AIICO Insurance Plc, which spent N6.3 billion on its management, declared N30.4 billion Gross Premium Income, meaning, that it had made five times the amount it spent on its management.

AXA-Mansard Insurance Plc came second, having spent N5.2 billion on its management, translating to 25 per cent of the N20.6 billion Gross Premium Income it made in the year under review.

FBN Insurance Limited came third, having made N19.5 billion Gross Premium Income and spent N3.26 billion, translating to about 14 per cent on its management.

Ensure Insurance Plc came fourth, as it expended N3.24 billion as management expenses, while making N7.66 billion gross premium income, even as WAPIC Insurance Plc came fifth with a management expenses of N3.1 billion from N6.3 billion it declared as Gross premium income in its 2017 financial year end.

Meanwhile, LEADERSHIP learnt that the National Insurance Commission (NAICOM) in line with its regulatory priorities, has put a limit on the spending of some firms whose management expenses seems injurious to their profit margins.

NAICOM said, from the observation made on financial accounts submitted by some companies, those with huge expenditure profiles, have been mandated not to spend beyond certain limits.

The Commissioner for Insurance, Alhaji Mohammed Kari, had, last year, said the decision to limit spending of some insurers was taken to ensure companies do not spend unnecessarily to the extent that they would not be able to attend to claims settlement.

He expressed his sadness over the continuous increase in management expenses of underwriting firms across the country, stating that, this is affecting their ability to give good returns on investment to their investors.

He had urged them to slash their respective management expenses, and it seems operators have yielded to the advice as there was about N1.31 billion drop in management expenses of insurance industry in 2017 as against N88.21 billion the sector posted in 2016 financial year, even though, the industry made more gross premium income in 2017 than in 2016.

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