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NIC’s next plan for growth

The insurer is enhancing automation, product innovation and pushing for asset restructuring to drive profitability

Kampala, Uganda | JULIUS BUSINGE | Uganda’s oldest insurance firm, NIC Holdings Ltd, plans to ride on new technologies and product innovations to sustain profit growth.

Flanked by two other top executives for the company, Bayo Folayan, the managing director at NIC Holdings Ltd revealed during a zoom meeting titled “facts behind figures of NIC Holdings for the first half of 2020” on Oct.20 that the firm’s plan is to also  continue with asset restructuring to create liquidity, maximising investment opportunities and supporting insurance business.

“2020 started with a lot of optimism,” Folayan said adding that full implementation of the ‘no premium, no cover policy’ in 2019 did not have significant adverse impact on premium income.

The firm’s executives said NIC Holdings would have performed better without the outbreak of coronavirus pandemic.

“The outbreak of the COVID-19 pandemic and the consequent lockdown of business activities has changed the dynamics,” Folayan said.

Notwithstanding the challenging business environment, NIC group’s premium income remained stable dipping by a marginal 1% for the six months ended June.30.

The group’s premium income decreased slightly by 1% to Shs9.33bn from Shs9.37bn during the same period under review.

The life insurance business recorded a sharp drop due to the impact of COVID-19 pandemic on both individual and group life businesses mainly from clients in the education institutions which suffered prolonged closure due to the pandemic.  However, non-life p income grew by 3% during the period.

Reinsurance ceded increased by 16% from Shs3.4bn ceded in the first half of 2019 to Shs4bn in the first half of 2020 due to the higher cost of placing the aviation businesses acquired during the period.

Commission income increased by 10% from Shs551m earned in the first six months of 2019 to Shs608m in 2020.

Commission expense on the other hand decreased by 1% from Shs1bn incurred in the first half of 2019 to Shs1bn in first half of 2020. Net claims incurred decreased by 17% to Shs1.2bn from Shs1.4bn incurred in the first half of 2019.

Management expenses decreased significantly by 16% from Shs5.96bn incurred in the first half of 2019 to Shs5bn in 2020.

Investment and other income increased by 12% from Shs1.8bn earned in the first half of 2019 to Shs2bn in the first half of 2020.

There was an 8% dip in rental income due to the COVID-19 lockdown but this was more than compensated for by other income and interest income from fixed deposits and treasury bills, executives said.

Profit before tax for the group improved significantly by 158% to Shs2.9bn from Shs1.1bn recorded in the first half of last year.

Folayan said, the 17% reduction in net claims incurred, 84% significant reduction in fair value loss on quoted shares and 16% reduction in management expenses boosted the company profit before tax for the period.

Though NIC life insurance policies recorded a loss before tax of Shs180m in first half of this year it was a major improvement from the loss before tax of shs1.49billion suffered in the same period last year.

On the other hand, NIC general insurance business recorded an improvement of 20% in its profit before tax in first half of 2020 of Shs3.1bn when compared to the first half of 2019 figures of Shs2.65bn.

Net profit up

Profit after tax for the group, for the first half this year also improved significantly by 257% from Shs677mn recorded last year to Shs2.41bn.

Both businesses recorded improvements with NIC Life recording an 88% reduction in loss after tax from Shs1.5bn loss in H1/2019 to Shs180mn loss in H1/2020.

NIC General on the other hand recorded an improvement of 20% in its profit after tax from Shs2.1bn in H1/2019 to Shs2.5bn in H1/2020.

The group’s total assets decreased by 4% from Shs94.9bn as at year end 2019 to Shs91.3bn as at H1/2020 as a result of the significant decrease in reinsurers’ share of insurance contract liabilities by 57% which, executives said, will normalise after year end valuation of liabilities.

Total liabilities for the group in the period under review decreased by 10% to Shs55.8bn as at June 30, 2020 from Shs61.8bn as at December 31, 2019.

The decrease in total liabilities was due to significant reduction in insurance contract liabilities and investment contract liabilities.

Shareholders’ equity increased by 7% from Shs33bn as at end of December last year to Shs35.5bn as at June 30, 2020 due to current year total comprehensive income.

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