The Sunday Mail
SMALL players in the insurance sector are scrounging for business as the Big Five of Old Mutual Insurance Company (formerly RMI), Alliance Insurance Company, NicozDiamond, Cell Insurance and Zimnat Lion, have cornered more than 70 percent of the market.
However, this has spawned innovation as companies craft customer-centred products to generate new business.
Insurance and Pensions Commission (IPEC) acting commissioner Mr Pupurai Togarepi told The Sunday Mail Business that while the sector has been recovering since adoption of multiple currencies in 2009, five companies dominate because of their giant balance sheets.
Net premium written has grown by 6,8 percent from US$66,7 million as at March 31 last year to US$71,2 million at March 31, 2014.
Assets have also grown from US$164,3 million as at December 2013 to US$181,5 million in March 2014 — representing a 10,5 percent growth.
“The insurance industry has been on a rebound since dollarisation both in terms of assets and new business. This is true for short-term insurance, life and funeral insurance.
“As the economy continues to recover, one can only expect full recovery of the industry as in most cases insurance business follows business trends; there is a positive correlation between economic growth and growth in insurance business.
“Business written by insurance companies is usually related to the size of the balance sheet of the particular player (and) the top five players in terms of both market share and capital are: Old Mutual Insurance Company (formerly RMI); Alliance Insurance Company; NicozDiamond; Cell Insurance (and) Zimnat Lion (but not in order of market share),” said Mr Togarepi.
Old Mutual Insurance Company managing director Mr Donald Muthe recently said the company increased its gross premiums written (GWP) to US$28,4 million last year from US$6 million in 2009.
Underwriting profit grew to US$3,43 million from zero, while profit before tax went up to US$7,8 million from US$1 million.
With a market share of 13,5 percent, Old Mutual Insurance Company leads the pack.
Shareholders’ funds grew to US$19,5 million last year from US$4 million in 2009, while the balance sheet jumped from US$10 million to US$32 million.
On the other hand, short-term insurer NicozDiamond reported a set of impressive numbers for the half-year ended June 30, 2014, underlined by a 14 percent growth in GWP to US$16 million.
Rental and investment income declined slightly from US$600 000 to US$400 000.
This saw the group reporting a 45 percent growth in operating profit to US$1,2 million, while profits from insurance underwriting amounted to US$700 000 (the insurance entity contributed 100 percent of underwriting profit).
Claims grew at 16 percent during the period, slightly ahead of growth in GWP.
NicozDiamond’s total assets grew by 14 percent on the back of growth in accounts receivables and cash and cash equivalent on the balance sheet.
Short-term insurance is the most competitive sub-sector in the industry and NicozDiamond is a market leader in this regard.
Experts say growth in GWP witnessed by operating insurance companies is a natural result of the closure of market players who failed to meet new minimum capital requirements.
Fellow short-term insurer Alliance Insurance Company is estimated to have a 12 percent market share.
The company operates in three independent but integrated business units, namely: Alliance Short-Term, Alliance Health and Alliance Life Protection.
Short-term insurers make most of their business from motor vehicle insurance as the country’s vehicle population stands at 1,2 million according to the Zimbabwe National Road Administration.
However, insurers are concerned that third-party motor insurance dominates compared to full (comprehensive) cover, which costs more.
Local insurers are spreading their tentacles into Mozambique as they seek to boost their revenues.
ZB Financial Holdings (ZBFH) wholly owned subsidiary, ZB Reinsurance, has announced intentions to expand into Mozambique by the end of 2015.
“We are looking at getting into the market in the next 12 months. We are entering into Mozambique because the market is growing in terms of foreign direct investment and there are opportunities in the Mozambique reinsurance business,” said ZBFH group chief executive officer Mr Ronald Mutandagayi in a statement accompanying their results for the six months ended June 2014.
NicozDiamond, which has operations in Malawi, Zambia and Uganda, opened Diamond Seguros Mozambique last year.
Mozambique is the fastest-growing economy in SADC, powered by construction, agriculture and coal and gas.
The IMF projects Mozambique to register a real GDP growth of 8,3 percent this year and 7,9 percent in 2015.
FDI into Mozambique was US$2,1 billion in 2013, compared to Zimbabwe’s US$410 million.
