24 May 2018

Uganda: NIC's Remarkable Profit Growth

Kampala — Uganda's insurer, National Insurance Corporation Holdings popularly known as NIC, has recorded a remarkable growth in net profits for 2017 owing to an increase in commission and fees, incomes as well as again of its investment properties.

Available financial results show that the listed insurer saw its net profit more than double from Shs937million in 2016 to Shs1.9billion in 2017. This represents a 122% growth.

The company's total income increased from Shs12.9billion to Shs17.6billion - boosted by increase in gross premiums written, investment and interest income, fees and commission income. The company's assets also increased by 10% to Shs108billion last year.

However, the company's liabilities increased from Shs62billion to Shs70billion while net claims increased by 40% to Shs1.4billion during the same period under review. Total expense grew by Shs3.8billion to Shs14.8billion.

Elias Edu, the acting managing director at NIC told The Independent in an email response on May 14 that the group's 2017 performance is attributed to the growth in gross premium income, investment and interest incomes, fees and commissions and valuation of properties.

The company saw its gross premium written increase from Shs13.8billion in 2016 to Shs16.9billion in 2017 while investment and interest income increased from Shs1.7billion to Shs1.9billion during the same period under review.

Similarly, fees and commission income grew from Shs1.3billion to Shs1.5billion while evaluation of properties rose from a loss of Shs351million to Shs4.6billion.

"... there was significant growth in reinsurance ceded thus leading to increased commission income," he said adding, "there was an improvement in the general real estate market and this enhanced the values of the group's properties."

The company also recorded good performance under its general insurance business. Edu said the company has put in place strategies including further improvement in their claims and underwriting processes to meet the expectations of numerous policy holders.

"Total claims settled in 2017 amounted to Shs2.4billion and this had positive impact on our business as it improved business retention," he said.

On improving the company's cash position, without giving details, Edu said a comprehensive investment portfolio restructuring program at group level is being implemented.

He added that an increase in the group's total assets will provide assurance and confidence to existing and prospective clients of the group that NIC has capacity to fully protect them against all insured risks.

Going forward, Edu said the shareholders' funds increased by 9% to Shs38.7billion in 2017, up from Shs35.4billion in 2016.

"Our main business focus for 2018 is to increase our market share and deliver better returns to our shareholders," Edu said, adding that the company plans to pay Shs1.4billion as interim dividend before end of next month.

He said the company plans to continue coming up with customized products that meet customer's demands. Currently NIC controls merely 2.85% of Uganda's insurance market, and is ranked 13th out of the 29 insurance firms.

Market analysts, including Joseph Kibuuka, the deputy managing director at a brokerage firm, Crested Capital, say the company's growth in assets and profits in the year 2017 is positive news and 'may' attract new investors via the stock market, hence leading to a gain in its share price.

With a market capitalisation of Shs23.6billion, the company's counter has been one of the busiest at the Uganda Securities Exchange since the start of 2018 with its share price increasing from Shs13 per share to Shs 19 as at May 14.

"If the trend of performance continues, shareholders will have value for their investment," Kibuuka said.

Industry developments

On the general industry issues, Edu said developments that were spearheaded by the regulator in 2017 including the enactment of the new Insurance Act, bancassurance, agriculture insurance initiatives of government, compulsory local marine cover enforcement and increased activities in the oil and gas sector will define the performance of the sector in 2018.

In March last year, the Uganda Insurers Association unveiled the sector's 10 year market growth and development with the intent to see insurance penetration grow from the current less than 1% to 3% by 2025.

The plan intends to bring about increased penetration through streamlining a series of actions and activities under four key intervention areas; increased understanding and appreciation of insurance, lobbying and advocacy, leveraging on technology and capacity building.

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