At a time when most short-term insurance companies are reporting significant declines in earnings for the first half of 2008, Lion of Africa Insurance Company (Lion of Africa) has shown a return to profitability. The company has an A credit rating for its claims paying ability from credits ratings company Global Credit Rating.
Profits amongst most insurers were negatively impacted in the first half of 2008 as weather, fire and motor related claims increased following a number of years of abnormally low claims ratios.
Lion of Africa CEO, Adam Samie (pictured) says the strong economy and low claim ratios over the last five years have seen short-term insurers generating enormous profits. “While nobody expected such a dramatic and sudden turnaround, the slowing economy, a dramatic rise in the number of large fires and a 35% escalation in motor claims exposed a number of inefficiencies that had crept into insurance processes.
In contrast, Samie says that the actions taken by Lion of Africa last year to apply stricter underwriting standards, adjust premium rates and control claims, particularly for the motor portfolio, and management expenses left the company better prepared to meet the current market challenges head-on. The new IT platform implemented in 2007 also helped to improve efficiency levels and service.
As a result, net profit has seen a dramatic growth from a loss of R34.4 million to positive earnings of R13.8 million. “Our personal business, as well as the commercial segment including motor, marine, engineering and local authorities insurance segments have all shown improved operating performances,” says Samie.
With Lion of Africa’s focus of improving the quality, and not the quantity of its book, the group experienced a reduction in gross written income from R366.1 million in 2007, to R247.6 million in 2008. The loss ratio however, decreased significantly from 83.4% in 2007 to 55.5% in 2008, thereby boosting profitability.
Samie says the restructuring exercise undertaken by Lion of Africa last year Lion is also serving to considerably reduce management expenses. “The second half of last year saw management costs at R65 million, while we expect to keep them at R45 million for the remainder of 2008.
He adds that the group’s earnings from investments, which are primarily in cash holdings, did not suffer from the stock market volatility during the period.
Samie says that for the remainder of 2008, Lion of Africa will continue to improve its back office and service and broaden its product range to provide a firm platform for growth in 2009.
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