AIICO Insurance is not as profitable and efficient as most people think as the insurer’s aggressive claims payment has culminated in weak or negative underwriting performance.
According to the company’s 2015 audited financial statement, its combined ratios (CR) was 175.09 percent as at December 2015, a figure that has crossed the 100 percent threshold.
The CR is a measure of profitability used by an insurance company to indicate how well it is performing in its daily operations.
A ratio below 100 percent indicates that the company is making underwriting profit while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.
AIICO was imprudent as it made a total claims payment of N10.66 billion, which explains the underwriting loss of N5.49 billion at December 2014.
The Nigerian insurer’s top lines also suffered a hit as net premium income dipped by 58 percent to N6.74 billion while gross premium income fell by 50.23 percent to N10.41 million.
Many insurance companies and analysts believe that the CR is the best way to measure the success of a company because it does not include investment income and only includes profit that is earned through efficient management.