Life assurance underwriting profit declines in Q1, 2021

Life assurance underwriting profit declines in Q1, 2021

Staff Writer

INCREASE in claims and transfer to technical reserves caused underwriting profit for the life assurance sector to decrease to ZW$741, 27 million from ZW$104, 76 million the quarter ended 31 March 2020 to negative ZW$741,27 million.

During the period Gross Premium Written (GPW) by direct life assurance companies stood at ZW$3.42 billion, representing a nominal increase of 492% from ZW$577.7 million reported same period last year.

A Q1 life report for Insurance and Pension Commission (Ipec) shows that the increase of 492% in GPW for the quarter ended 31 March 2021 was mainly attributable to significant increase in premiums generated from the funeral assurance and group Life Assurance business.

Business growth in these two classes, was attributed to increases in premiums from both existing and new polices, as policyholders upgrade their policies for protection against the Covid-19 pandemic.

“GPW for life reassurers grew by 465% from ZW$11.4 million reported for the quarter ended 31 March 2020 to ZW$64.1 million for the comparative period.  On inflation-adjusted basis, the GPW for direct life assurers grew by 71.12% from ZW$577.7 million reported for the quarter ended 31 March 2020 to ZW$988.51 million reported for the quarter ended 31 March 2021.

Inflation adjusted GPW for life reassurers grew by 63.26% from ZW$11.35 million reported for the quarter ended 31 March 2020 to ZW$18.54 million reported for the quarter ended 31 March 2021.

During the period under review, eleven (11) out of the twelve (12) direct life assurance companies and all four (4) composite reassurance companies reported capital positions that were compliant with the prescribed minimum capital requirements of ZW$75 million and ZW$112.5 million respectively” read the report.

The Commission said it was engaging the non-compliant player to ensure compliance with minimum capital requirements.

As at 31 March 2021, direct life assurers recorded a 47.85% nominal growth in total assets from ZW$32.6 billion reported as at 31 December 2020 to ZW$48.2 billion.

Growth in assets was mainly attributable to the strong performance by equity investments on the Zimbabwe Stock Exchange.

The asset base for composite reassurers grew by 45.53% from ZW$1.30 billion as at 31 December 2020 to ZW$1.89 billion as 31 March 2021.

While the average prescribed assets compliance ratio for life assurers and life reassurers stood at 0.31% and 9.06% respectively against the required minimum prescribed asset ratio of 15%.

All direct life assurance companies and 3 (three) out of 4 (four) life reassurance companies were not compliant with the minimum prescribed asset ratio of 15%.

“In terms of profitability, nominal profit after tax for the life assurance sector declined by 25.49% from ZW$6.4 billion reported for the quarter ended 31 March 2020 to ZW$5.1 billion reported for the quarter ended 31 March 2021.

Underwriting profit for the life assurance sector decreased from ZW$104.76 million for the quarter ended 31 March 2020 to negative ZW$741.27 million.

The decrease in underwriting profit was mainly driven by an increase in claims and transfer to technical reserves from ZW$243.32 million for the quarter ended 31 March 2020 to ZW$3.19 billion for the quarter ended 31 March 20121.” read the report.