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Business Reporter
The Insurance and Pension Commission (IPEC) says the life insurance industry is showing signs of growth albeit at a rate lower than costs.
According to the IPEC report for the half year to June 2014 based on 10 direct players and two re-assurance companies the industry players wrote $128 million in gross premium terms compared to last year’s $122 million. The commission said out of the $128 million, 74 percent or $95 million was employee benefits business (June 2013:75 percent or $92 million) while 26 percent or $33 million was individual lines business (June 2013:25 percent or $30 million).

“In an apparent show of liquidity challenges affecting the economy, new business uptake contracted to 8 percent or $10 million  from 16 percent or $20 million in June last year whilst the balance of 92 percent or $118 million was attributable to recurring business (June 2013:84 percent or $103 million),” the commission said.

In net premiums terms the players during the period wrote $130 million compared to $123 million same period last year, resulting in a 6 percent annual rate increase. Total costs, however, rose 16 percent from $95 million in the same period last year to $109 million, thus outgrowing income streams by more than 10 percent. The industry’s combined ratio was 84 percent resulting in $21 million technical profit (June 2013: 77 percent and $28 million) reflecting increasing pressure on profit margins. IPEC said the industry should continue to cultivate new revenue streams through new products to cater for varied target markets including the lower end of the society.

During the period, total industry assets were $1,6 billion cumulative, a 9 percent growth from $1,5 billion for the comparative period last year while total liabilities were at $1,3 billion realising $250 million as free capital. (June 2013: $1,2 billion).

Ipec said two players did not meet the minimum capital requirements which took effect on 30 June 2014 in line with Statutory Instrument 21 of 2013.

“Consequently; consultations are on-going to manage this risk.”

The commission said for the half year, life companies wrote $126 million in Net Written Premiums, reflecting a 5 percent growth from the same period last year.

For the period under review, the three biggest players Old Mutual, Nyaradzo and FML controlled 82 percent at $102 million of net premium written compared to June 2013 level of $100 million or 83 percent.

IPEC said the industry must compete on product innovation and service in order to ride meaningfully on improving business confidence. Industry players paid $66 million in net claims, a 7 percent growth from $61 million reported in the first half of last year. On the other hand, net premiums grew by 5 percent. The life industry reported premium debtors of $7 million against a gross premium written of $128 million. Consequently, the average premium collection rate was 95 percent which is considered reasonable given the generally low disposable income in the economy.

During the period, the life industry held their investments in properties, 35 percent or $552 million compared to June 2013: 34 percent or$488 million, equities – $576 million or 37 percent (June 2013:42 percent or $618 million), money market – $215 million or 14 percent (June 2013:10 percent or $144 million), cash assets – $18 million or 1 percent (June 2013:1 percent or $12 million), other assets, $197 million or 12 percent (June 2013:12 percent or $179 million) whilst prescribed assets remained flat at 1 percent.

Ipec said life companies were largely capitalized as prescribed by Statutory Instrument 21 of 2013 whose deadline was 30 June 2014. The Commission said it is working with Altfin Life whose capital level is below the minimum required in order to restore compliance. The industry reported an average capital to liability and liquid ratios of 18 percent and 177 percent respectively and the Commission continues to engage the industry with a view to implementing a home-grown prototype of Solvency II in the medium to long term.

In terms of Reinsurance, uptake by players continues to be on the low side. “The Commission continues to encourage the industry to prudently reinsure for various reasons including but not limited to capitalization initiatives, technical expertise, new product innovation, risk spread among others.”

The insurance industry currently has two reassurance companies namely Baobab Re and FMRe. In the period reassures wrote $4 million in net premiums from $3 million realised in the same period last year. Ipec said armed with their cross-border knowledge of international markets, reassures are encouraged to spearhead new products in our markets especially micro-insurance in order to access the lower end of our societies and the informal sector. In terms of market share Baobab Life and Health controlled 68 percent of the market in net premium terms whilst the balance was underwritten by FM Re.