Life assurance sector in upward trajectory

ZSE rally supports asset base

PEC says there is need to diversify

ZIMBABWE’s life assurance industry, including reassurers, recorded a four percent growth in gross premiums written to US$272 million for the quarter ended September 30, 2017.

The bulk of the premiums were recorded in the life assurance business with a small balance coming from reassurers.

According to the Insurance and Pensions Commission’s (IPEC) fourth quarter report for 2017, life assurers accounted for US$266 million, an increase of four percent over the US$257 million written during the previous reporting period.

Reassurers weighed in with US$5,9 million, an increase of one percent over premiums written during the previous comparative quarter.

The sector also recorded similar growth in profits with its technical profit increasing by four percent to US$39,4 million from $37,7 million prior year.

During the quarter under review, new business (policies) written by the life assurance sector for both individual life and group business decreased by 26 percent and two percent respectively.

According to IPEC, the liquidity challenge is largely responsible for the decrease.

“In terms of competing interests, insurance ranks low on the priority list of customers,” said IPEC.

An increase of 18 percent was recorded on recurring business for the individual business while a decrease of 2 percent was recorded for group business.

IPEC said during the reporting period, the life assurance market generated a combined net written premium of US$262 million, which was an overall increase of 3,8 percent from the previous reporting quarter.

The insurers also managed to reduce their cost structures with total costs coming out at US$223 million, a decrease from US$246 million for the same comparative period in 2016.

The costs consisted of total net claims of US$142 million, management and administration expenses of US$68 million and commissions of US$13 million.

With the challenges currently bedeviling the property sector, characterised by high vacancy rates and low rentals, there was a decrease of 11 percent in the value of properties owned by insurers from US$560 million in 2016 to US$499 million in the quarter under review.

IPEC, however, encouraged the industry to prudently diversify their portfolios as there is too much concentration on property and equities.

Property and equities constituted 72 percent of the assets, which IPEC believes is a high level of concentration.

Meanwhile, as at September 30, 2017, the industry assets base grew by 83 percent as compared to the same comparative quarter of 2016.

The total life assurance industry assets were US$2,7 billion compared to US$1,5 billion as at September 30, 2016 with the equities market recording the biggest jump following the rally that was experienced on the Zimbabwe Stock Exchange last year.

The value of equity assets increased by 311 percent to US$1,4 million up from US$348,476 prior year comparative.

Notable gains were also recorded in prescribed assets up 31 percent to US$235,612, cash up 50 percent to US$43,580 and other investments up 78 percent to US$295,357.

Life assurers are obliged by law to invest in prescribed assets to augment Government efforts in economic and sustainable development.

The life assurance sector’s average prudential liquidity ratio was 433 percent as at September 30, 2017. The ratio implies that the industry has sufficient assets to meet claims when they fall due.

Companies in the sector were also adequately capitalised during the quarter under review with eight out of 11 operating companies compliant with the prescribed minimum capital requirement of US$5 million in terms of the Statutory Instrument 95 of 2017.

The life assurance industry was made up of 1 594 agents, 11 direct life assurance companies, 4 composite reassurance companies and 1 life reassurer as at September 30, 2017.

Zimbabwe has 11 registered primary life assurers, four composite reinsurers and one life reassurer under the supervision of IPEC.