Low commodity prices, pressure on local currencies’ value against the US dollar and scarcity of foreign currency funds for importation and debt service are all headwinds hammering African economies which are struggling to stimulate their growth particularly Nigeria and SA, the two major African economies are in a tougher economic situation.
Despite economic uncertainties and volatile environment, the African reinsurance corporate recorded a stable gross written premium of US$ 161m against US $164M from the previous year. Had the rate of exchange of the major African operational currencies remained constant, the gross written premium would have been US $166m at the end of the quarter, above the previous year’s figure.
The underwriting profit of $11.8m reported for the 1st quarter of 2016 was below the US $184m achieved in the same period of the preceding year. The overall underwriting margin decline to 9.01% from 13.45% mainly due to drop in earned premium and the increase of management expenses. However this performance is significantly higher than the average underwriting margin of -1.75% achieved in the last three years.
On the investment side, Africa Re reported an improved investment income growing by 8.6% to reach US $12m despite continuous low investment interest rates as well as volatile and challenging capital markets environment during the 1st quarter of 2016. This performance is mainly attributable to the fixed income portfolio that posted a return above the benchmark.
The trading environment in the African market will continue to be marked by growing industry capital, declining insurance rates, stiff competition and slow economic growth in many countries. However Africa Re will continue to rely on its resilience and the proactive re-engineering of its service delivery and business model. we expect 2016 performance to be in line with the forecast, barring further sharp depreciation of operational currencies and any catastrophe or peak claim, thanks to sustained marketing efforts, active review of loss-making risks and prudent underwriting.
Corneille Karekezi: Africa re chief executive officer