Funeral assurance industry net profit increase 10% in nine months 2018

Funeral assurance industry net profit increase 10% in nine months 2018

HARARE, Profitability for the Funeral Assurance Industry during the nine months of 2018 increased 10,6% to $3,25 mln from $2,9 mln same period in 2019, largely driven by an increase in gross premium written.

According to the regulator’s (IPEC) Q3, 2018, report for the industry, declining management expenses at $2,4 mln from $2,9 mln same period comparable, also contributed to the increase in net profit after tax.

“The volume of business generated by funeral assurance industry players as measured by the gross premium written (GPW) increased by 5.45% from $29.78 million for the nine months ended 30 September 2017 to $31.41 million for the nine months ended 30 September 2018,” read part of the report.

During the period, total industry assets stood at $81.04 million as at 30 September 2018,up from $71.62 million as at 30 June 2018.

Ipec noted that the asset growth experienced was mainly driven by purchases, revaluations of property and intercompany investments whose value increased by $9.29 million for the nine months ending 30 September 2018.

The amount invested by funeral assurers in prescribed assets increased in absolute terms from $1.49 million as at 30 June 2018 to $1.50 million as at 30 September 2018.

Notwithstanding the increased investments in prescribed assets, the industry average prescribed asset ratio deteriorated from 2.04% as at 30 June 2018 to 1.86% as at 30 September 2018.

The regulator noted that the industry average prescribed asset ratio was significantly below the regulatory minimum requirement of 7.50% for funeral assurers.

Meanwhile, total claims incurred increased by 3.14% from $8.88 million for the nine months ended 30 September 2017 to $9.16 million for the nine months ended 30 September 2018.

During the period under review, three out of nine industry players reported capital positions which are above the minimum capital requirement of $2.50 million for funeral assurance players.

In terms of business written performance, the funeral assurance industry’s total GPW increased by 5.45% from $29.78 million for the period ended 30 September 2017 to $31.41 million for the nine months ended 30 September 2018.

Recurring business accounted for 96.59% of GPW, whilst new business constituted 3.41% of GPW for the nine months ended 30 September 2018.

During the period, five out of the nine industry players had a negative business growth ranging from -27.10% to -11.02%.

“The Commission continues to encourage all industry players to devise methods and mechanisms of growing their books especially given the development of the microinsurance framework.

“Such innovations should target the economically vulnerable and with the increased competition from life assurers offering similar products, players need to continuously review their pricing and product structuring in order to remain competitive,” Ipec said.

However, individual business continues to dominate business mix for the funeral assurance industry as this accounted for 58.49% of GPW, whilst corporate business accounted for 41.51% of GPW for the nine months ended 30 September 2018.