Insurers Pooled N938bn Investment Revenue

Despite the challenging operating environment in the country, insurance companies have recorded growth in investment income which has hit N938 billion.

Economic Confidential finding showed that the life segment made over 60 per cent of the income as they have lots of long-term funds, especially annuity funds, to invest in lucrative investment windows, leaving 40 per cent for the general insurance.

The industry investment income, it was learnt, grew by 12 per cent between 2018 and 2019 financial year-end, and it is projected to rise to over N1 trillion by the end of 2020 financial year.

A further breakdown of the industry’s investment portfolio showed a 56 per cent allocation to government securities, 12 per cent in bank placement and deposits, 12 per cent in real estate, seven per cent in subsidiaries and 11 per cent in equity investments.

With an average investment yield of about 7.9 per cent, real interests are negative as inflation is currently over 14 per cent.

The average yield on 364 days treasury certificates was about 14 per cent in 2018 significantly higher than the industry’s average returns on its investment portfolio.

To this end, Agusto & Co. anticipated that the insurance industry will perform even lower with risk-free yields currently below five per cent, adding that the figures highlight inefficient investment management strategies as the main factor resulting in the low returns for the industry.

Head, Augusto Consulting, Jimi Ogbobine, said most insurance companies do not have in-house investment policy while others have outdated ones. He said insurance firms are not making enough from investment because they do not have investment analysts on their board.

He charged insurers to utilise opportunities in investment to boost their investment income, especially the life arm which has long-term funds to invest.