Real Insurance Company of Malawi Limited, the only insurance company listed on the Malawi Stock Exchange (MSE), has touted its recapitalisation for strengthening its balance sheet and boosting clients’ confidence.
In the year ended December 2012, the insurance firm recapitalised with K336 million (about $840 000) to meet the Reserve Bank of Malawi (RBM) capital requirement.
The recapitalisation, apart from assisting in meeting regulatory requirements, according to board chairperson Thomas Kanyuka and one of the directors, Rex Harawa, gives confidence to clients and assists the company to grow its written premiums to attract profitable businesses and increase its investment income from 2013 and beyond.
The company, whose total assets have increased by 26 percent, registered a 12 percent growth in written premium in 2012 against 14 percent in 2011.
Generally, in 2012, the business operating environment was tough for most businesses compounded by the shortage of foreign exchange and fuel in the first quarter (January to March), in addition to the 49 percent devaluation of the kwacha which increased companies’ operational costs.
As a result of this, Real Insurance has reported a pre-tax loss of K157 million (about $392 500) due to two key factors, namely the cancellation of policies at year-end in compliance to the Reserve Bank of Malawi (RBM) directive on premium payments and the increase in reported claims.
At year-end, cancelled policies that had been outstanding for more than 90 days totalled K118 million (about $295 000).
“The cancelled policies, mostly from the motor segment of the business, negatively affected the reported gross written premium for the year. The company, further, experienced an unprecedented increase of 41 percent in reported claims against prior-year,” reads a statement accompanying the financial results.
The claims increased due to significant increases in number of reported motor accidents, unbudgeted increases in prices of motor spare parts, increase in court awards to settle claims and high litigation costs.
Real Insurance Company of Malawi Limited, whose share price has traded at K1.20 with 250 million shares on issue, started operating in 1959, making it the oldest insurance company in Malawi operating as a branch of Royal and Sun Alliance Group Plc until December 1999 when the group reorganised its operations in East and Central Africa.