NIC registered a whopping 3,394% increase in impairment provision on receivables from sh34.15m in 2018 to sh1.19b in 2019 Bayo Folayan. Courtesy photo National Insurance Corporation (NIC) has registered a 44% increase in loss after tax (LAT) of 2.75b in 2019 due to the insurance sectors new cash and carry policy, the insurance firm’s senior management has said.
The Insurance Regulatory Authority (IRA) instructed insurance firms to stop providing insurance on debt and only sell insurance to the public on a cash basis in 2019. The regulator also directed against the recognition of old unpaid premiums, accumulated through the now outdated accrual basis, on the asset registers of industry players.
Consequently, NIC registered a whopping 3,394% increase in impairment provision on receivables from sh34.15m in 2018 to sh1.19b in 2019 due to implementation of the insurance industry premium payment policy on "cash and carry" basis.
Bayo Folayan, the NIC Holdings managing director said in an investors briefing that despite the larger after tax loss, business income grew by 15% to sh20.29b. The firm paid out sh2.09b in claims, 37% higher than the year before and it spent sh13.74b on management costs which was 2% higher year on year.
"We are reducing our liabilities to fit within the new regulatory model and we are critically looking at bringing down management expenses. We expect the business to improve as the market gets used to the cash and carry policy," Folayan said.
He added that the NIC is looking to automate its processes and to continue with product innovation to as to increase its market share. In 2019, the firm realized a 119% growth in cash and cash equivalents to sh2.6b. NIC’s asset book decreased by 6% to sh94.99b.
Meanwhile, at the same briefing, Paul Bwiso, the Uganda Securities Exchange (USE) CEO pointed out that 2020 had registered a better start of the year than 2019, but then the covid-19 had led to the lowest turnover over the past four years of sh279.8m.
Bwiso said that Umeme had dominated activity, taking up 91.7% of total market turnover in the second quarter of 2020 or about sh2b. In contrast, NIC posted 22 deals where 185,321 shares were traded equivalent to turnover worth sh1.7m.
