Goldlink Insurance reverts to profitability as premium income falls

Goldlink Insurance Nigeria plc has reverted to profitability amid falling premium income.

Analysts say the faltering premium income means the Nigeria insurer is not efficient in managing its underwriting capacity.

For the year ended December 2013, Goldlink recorded a net income of N68.50 million from a loss position of N824.67 million the same period of the corresponding year (FY) 2012

Underwriting profit increased by 27.10 percent to N1.36 billion to N1.36 billion, from N1.07 billion the previous year.

Goldlink is finding it harder to tap into the Nigerian large market that crave for insurance cover as net premium income (NPI) were down by 27.05 percent to N3.37 billion in 2013 compared with N4.62 billion in 2013.

Gross premium income fell by 28.60 percent to N3.97 billion in the review period, while gross premium written dropped by 19.44 percent to N4.35 billion. Analysts say Goldlink should introduce market penetrating products in order to increase its premium income and explore the cornucopia of investment opportunities in Nigeria.

Premium income for the insurance and reinsurance industry is improving in Nigeria, Africa’s largest economy and oil producer, as regulators enforce rules requiring companies with at least five workers to provide life coverage. The National Insurance Commission is also making property insurance mandatory in the nation of more than 170 million people.

While Goldlink moved to the path of profitability, the company had operating expenses swallow underwriting profit that culminated in low profit margins. The company’s management expenses to underwriting profit ratio were 94.85 percent.

This means that the company spent 94.48 percent to create the underwriting profit of N1.36 billion, leaving a low profit margin of 5.15 percent. Goldlink was cost efficient as claims and underwriting expenses fell by 42.54 percent to N2.08 billion in 2013 from N3.62 billion the previous year.

Managenent expenses reduced by 17.27 percent to N1.29 billion in 2013, as against N1.10 billion the previous year.

The company’s total assets reduced by 25.85 percent to N2.61 billion in 2013 compared with N3.52 billion in 2012, while there were negative reserves of N10.40 billion.

Analysts say the company should embark on a capital reduction and reorganisation scheme to write off the negative reserves.

Nigeria insurance sector contribution of 0.56 percent to GDP, which is less than 1 percent performance, makes it a laggard when compared with Kenya and South Africa contributions to their economy.

Goldlink’s share price closed at N0.53 on the floor of the exchange, while market capitalisation was N2.41 billion.

BALA AUGIE