Unrealised gains/ currency reforms boost short-term insurer’s earnings

Unrealised gains/ currency reforms boost short-term insurer’s earnings

Staff Reporter

HARARE, THE short-term insurers 2019’s after tax profit increased 766,99%  to $359,2 million compared to $41,47 million in 2018 mainly driven by movements in unrealised gains as well as currency reforms.

Ipec in an industry report, said there was a slight movement in the combined ratio for the short-term insurers from 94.75% for the twelve months ended 31 December 2018 to 91.03% for the period under review.

Generally, a combined ratio of below 100% indicates that the insurers are making underwriting profits while the opposite is true for a ratio above 100%.  However, Underwriting profit increased by 329.07% from $8.28 million as at 31 December 2018 to $35.51 million during the comparative period in 2019.

Ipec noted that the industry’s average return on assets (ROA) and return on equity (ROE) were 34.40% and 67.62% respectively for the period under review.

In terms of Liquidity, Total cash and near cash assets in the form of money market and short-term prescribed assets increased from $197.46 million as at 31 September 2019 to $321.77 million as at 31 December 2019. Individual insurers` acid test ratios as at 31 December 2019 ranged from 4.83% to 1,097.53%.

Total Gross Premium Written (GPW) by short-term insurers for the year ended December 31, 2019, increased 395 percent to $1,37 billion  compared to $277.35 million reported for the comparative period in 2018.

The report shows that the total business written by short-term reinsurers increased from $116.38 million in 2018 to $664.90 million for the period under review.

During the period under review, Zimnat Lion, Nicoz Diamond and Alliance were the market leaders in terms of GPW with a combined market share of 45.20% for the twelve months ended 31 December 2019.

The report shows that total assets increased from $1.20 billion reported as at 30 September 2019 to $1.90 billion as at 31 December 2019.  All eighteen (18) insurers reported capital positions which were above $2.5 million as at 31 December 2019.

Old Mutual, Zimnat and Nicoz Diamond were the market leaders with a combined market share of 43.46%

Ipec noted that the reported capital positions were computed without accounting for non-admissible assets as stipulated in Statutory Instrument 95 of 2017.

It added that at the time of compiling the report, the MCR for insurers was reviewed upwards with short-term insurers having a minimum of $37.5 million.

“A snap shot of the industry shows that only 11 entities are compliant with the new minimum capital requirement. The Commission has engaged the industry players to submit their roadmaps for compliance by 31 March 2020,” Ipec said.

Investments in prescribed assets increased by 26.68% from $193.17 million as at 31 September 2019 to $244.84 million as at 31 December 2019.

During the quarter, only one (1) short term insurer and two (2) reinsurers were compliant with the minimum prescribed asset ratio of 10% as at 31 December 2019. “All non-compliant players were advised to submit compliance roadmaps.”

Short-term reinsurers had an asset base of $1.13 billion as at 31 December 2019, reflecting a 54.51% increase from the $734.37 million reported as at 31 September 2019.

Ipec said that as at 31 December 2019, all the registered short-term reinsurers reported capital positions that were above the minimum capital requipment of $5 million. However, all the short term reinsurers were non-compliant with the recently increased MCR as at 31 December 2019.

During the period under review, the majority of the insurance and reinsurance brokers had regulatory capital which was in excess of the required minimum threshold of $100,000. Based on the new MCR, only fourteen insurance brokers were compliant as at 31 December 2019.

However, Ipec noted, “in this fourth quarter 2019 report, the reported figures for Ambassador Insurance Brokers, Auto and General Insurance Brokers and Rainbow Insurance Brokers were based on their third quarter 2019 returns.

The three insurance broking entities failed to submit their fourth quarter figures to the Commission. In addition, twelve (12) insurance brokers were penalised for late submission of the 2019 fourth quarter returns.

The brokers failed to submit their returns to the Commission within the stipulated 21 days after the end of the quarter.