Re-insurance firm hits gold
Despite a growing uncertainty in the non-banking sectors of established economies, Namibia National Reinsurance Corporation Limited (NamRe) has grown its asset-base from N$82m to N$N$139m as of 2011.
The re-insurance firm also witnessed growth in their shareholder funds recorded from just above N$60.8m in 2008 to N$99.8m by last year despite growing economic challenges in the local economy.
The company’s financial statements also indicate a favourable increase in the profit margin of just above N$11m in 2008 to above N$15m according to their latest financial results.
Not only has the global firm enjoyed its strong balance sheet but the international credit rating has also upgraded the re-insurance giant’s credit rating from a negative BBB to a positive AAA rating, which could also boost their future endeavours for any loan application should they wish to expand.
Created to construct re-insurance opportunities for Namibian companies that require the services from outside the country, NamibRe seems to have managed to cater for the local market thus far.
“The Namibian insurance industry witnessed a lack of re-insurance capacity for a very long period of time. This meant that most insurance companies had to buy re-insurance businesses from abroad. This also meant that a large volume of capital outflow was headed for abroad. It is against this background that Namibia National Reinsurance Corporation was established by an Act of Parliament (Act No 22 of 1998); a Namibian enterprise tasked to carry on the re-insurance development of and the participation of the people of Namibia in the insurance industry in Namibia,” said NamibRe chairperson, Maria Dax.
During a business breakfast held by NamibRe last week, Dax pointed out the fact that they are working hard to keep their company’s steady performance despite the challenges and would not like to disappoint the trust given by their line boss, Finance Minister Saara Kuugongelwa-Amadhila, at any point.
Moreover, the corporation, which upon its inception in 2001, stood at only N$5m in gross written premium has (in just a decade) exceeded N$120m as of 2011. This shows its growing strength in the sector, which at the beginning was almost non-existent in the country.
Whilst their net profit stood at over N$11.2m in 2008, improved by N$13.8m in 2009 and 2010, it recorded N$95m last year.
Munich Re Africa executive manager - client management, Baravanda Madhav, touched on keeping a business afloat in this uncertain economy, saying there is a need to look at the balance between risks and capital return, hence explained the concept of return on risk-adjusted capital.
“The amount of capital required is determined by the volume and risk characteristics of the business. Hence, a lower risk product would require less capital than a risky one. Therefore, to provide the same amount of capital for an equivalent sum assured, the higher risk product’s capital and profit loading must be higher,” Madhav stressed.
He added that for business to stay in business longer, business owners should try to keep their businesses competitive; meaning that they should regulate their cost of capital at a competitive level depending on how the industry performs and how they want the particular business to deliver on the market - a strategy he pointed out as ‘steering business’.