Business Reporter
Profitability for both direct short term insurance and reinsurance business deteriorated during 2014 owing to depressed business growth in the wake of increasing operating expenses, claims and commissions.

According to the IPEC non-life report for the fourth quarter, the volume of profit recorded by non-life insurers in 2014 decreased 14,74 percent to $10,25 million from $12,02 million in December 2013. This was mainly attributable to an upsurge in operating expenses coupled with an increase in net incurred commission.

Operating expenses increased 10,40 percent to $52,99 million from $47,99 million for the year ended 31 December 2013. On the other hand, net incurred commission amounted to $8,12 million for the year reflecting a 67,74 percent increase from $4,84 million reported in 2013.

The report says the decline in total profit after tax recorded by direct non-life insurers resulted in the return on equity (ROE) and return on assets (ROA) deteriorating to 13,16 percent and 5,73 percent from 18,52 percent and 7,32 percent.

“Notwithstanding the decrease in the ROE and ROA, the returns generated by the non-life insurers were still considered relatively attractive given the returns offered by other investment vehicles within Zimbabwe and abroad,” said IPEC.

A total eight insurers reported losses ranging from $8 000 to $394 593. The number of insurers who reported losses compare unfavourably with a total of five reported for the year ended 31 December 2013.

IPEC notes that while the overall profitability of the non-life insurance industry deteriorated during the year under review, the profitability of the core business of the insurers i.e. underwriting improved.

“This is evidenced by the increase in underwriting profits to $8,39 million from $7,05 million. The increase in underwriting translated into an improvement in the combined ratio to 92,85 percent from 93,32 percent.”

The improvement in the profitability of the core business was mainly attributable to a decrease in the loss ratio to 40,74 percent from 43,25 percent.

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