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ESRIC INVESTMENT INCOME UP 9.3%

26/03/2023 16:50:00 Mhlengi Magongo

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MBABANE – The Eswatini Royal Insurance Corporation (ESRIC) investment income hiked from E31 million to E33.7 million.

This was outlined in their integrated annual report, where the insurance company availed that the dividend was E128.7 million, an expansion from the previous financial year where they record E105.3 million as dividends. The life insurance business achieved premium growth of five per cent during the period under review. Operating profit, however, decreased from E72 million recorded in the same period last year to E4 million. The significant decline was largely due to a marked increase in the volume of COVID-19-related claims. During the year, to December 31, 2021, the corporation’s operating profit remained flat at E145 million compared to E145.5 million in the prior year, broadly in line with the growth achieved in the gross written premium (GWP).

As at December 31, 2021, the non-life international solvency ratio (net equity as ratio to net written premiums) stood at 119 per cent (2020: ratio of 117 per cent) compared to the industry international solvency ratio benchmark of 50 per cent. The life insurance business is also well capitalised with excess assets over liabilities of E258.1 million (2020: E313.9 million). On December 31, 2021, ESRIC’s capital adequacy requirement (CAR) was E98.1 million (2020: E86.9 million).

assets

The actuarial valuation of the Life (long-term) insurance business at December 31, 2021 shows that the value of assets exceeds the value of liabilities by E258.1 million (2020: E313.9 million). The total embedded value of ESRIC’s life business as at December 31, 2021 stood at E260 million, compared to E318 million in the previous year, after allowing for two times CAR in the 2021 opportunity cost of capital to be in line with the Corporation’s dividend policy. This calculation was conducted broadly in accordance with the general guidance contained in PGN107 issued by the Actuarial Society of South Africa, a standard which does not yet apply in Eswatini.

ESRIC Chairperson Muhawu Maziya in the report said: “The economy is beginning to show signs of recovery from the pandemic-imposed economic slowdown. With vaccines now by and many more available, and improved treatment of COVID-19, governments across the world have been opening social and business activity more and more, inspiring hope of growth once business operations resume. Finally there are indications of light at the end of the tunnel.” Maziya said they continued in the course of the year under review with their mandate of providing Non-Life insurance, Life Assurance and Pension Administration services in a very challenging business environment. He said ESRIC had been affected in the past two years by the disruptions brought about by the COVID-19 pandemic, which ravaged the business environment in the country, placing many of their clientele in a bearish environment that inevitably negatively affected their plans for growth.

clients

“As if that was not enough, business was further crippled by the civil unrest in the second half of the year. This also disrupted normal business and placed further downward pressure on our clients and negating our efforts for growth. “As a consequence of this unfavourable environment, the year under review has generally been marked by stagnant performance of premiums resulting in the non-life section of the business recording only one per cent growth. The life section of the business, however, grew by 4.6 per cent compared to 2020”, he added. Maziya further mentioned that the market was competitive, overall pressure on pricing continued across most classes of business and they were compelled to respond by further adjusting overall prices, forgoing growth in order to retain market share.

“Notwithstanding these developments, the corporation delivered pleasing overall performance consistent with prior years. The Corporation has maintained its reputation as a reliable insurer and continues to be the major player in the industry in the country. In spite of the challenging environment in the year, the corporation is still poised to deliver value and grow product and distribution capabilities while maintaining pricing discipline, superior underwriting and stellar customer service as our core focus to grow the business and achieve sustainable profitability,” he said.

Meanwhile, 91 per cent local reinsurance profits are foreign owned. The reinsurance industry in Eswatini is dominated by foreign companies, mostly from South Africa. According to the Financial Services Regulatory Authority’s (FSRA) annual report, the local market generated E385 million in reinsurance premium. Of this, only nine per cent a figure of E35 million was placed locally. FSRA said there was a notable year on year increase in GWP of five per cent from E506 million to E530 million. Quarter on quarter GWP increased by 50 per cent from E267 million. The top four classes of insurance business collectively contributed to 66 per cent of the GWP amounting to E350 million.