Prima Reinsurance Plc (Prima Re) is a wholly-owned reinsurance company providing products and solutions in the domestic and business sector in Zambia. The company underwrites classes of marine and non-marine reinsurances, which include fire, motor, engineering, aviation, agricultural and work-related accidents. Reinsurance is the practice of insurers transferring portions of risk portfolios to other parties by some form of agreement to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. Prima Reinsurance is fully-owned and promoted by a group of Zambian Professionals and entrepreneurs and it was incorporated in 2006 as a public limited company and was the first reinsurance company to enter the Zambian marketplace.
In 2018, the removal of insurance levy on reinsurance premium was welcomed by Prima Reinsurance because it meant a large reduction in the cost of local reinsurance hence making it more competitive on the international market. Moreover, the draft insurance Bill which was presented in the year currently under review improved and strengthened the legal framework for the insurance industry. Over the previous years there has been great concern about the amount of premiums that are being taken out of the country through reinsurance as a result leaving the capacity of the local reinsurers largely unutilized. Through the draft insurance Bill it has being hope that loophole will be sealed hence growing the local market and enhancing the retention of premiums locally for the benefit of the economy.
Prima Reinsurance Plc in 2018 recorded a 13% contraction in Gross Written Premium (GWP) amounting to ZMW 33.182 million compared to ZMW 38.44 million in the previous year. The net claims reduced from ZMW 5.20 million in the previous year to ZMW 1.728 million in the current year attributed to prudent underwriting. Due to the implementation of IFRS 9 in the year 2018, the company recognized an impairment loss of ZMW12.8 million in respect of the insurance receivables as at 31 December 2018.This resulted in the loss of ZMW 1.555 million for the year compared to a profit of ZMW 3.141 million in the previous year. There was an increase in other income from ZMW 4.06 million to ZMW 4.38 million attributed mainly to the appreciation in the kwacha against major foreign currencies. Prima Re’s balance sheet decreased with total assets recorded at ZMW 57.70 million from ZMW 65.66 million in the previous year as a result of the impairment loss. Current liabilities decreased from ZMW 20.27million in the previous year to ZMW 15.50 million in the current year due to the decrease in the unearned premium reserves and repayment of bank overdraft. The company’s solvency margin remains above 170% and the basic earnings per share declined from ZMW 0.10 to ZMW 0.05. Overall, the company adopted a deliberate policy to forfeit organic growth and focus on quality and credit worthy business.
The Prima security on LuSe has out performed the market average (LuSe All Share Index) for the most part of the last 5 years. Dipping to its lowest performance in March 2018, the security has regained most of its lost value during the last financial year. The stock current trades at K2,80, a price it has held since September 2019 which has been above the all share index.
Moving forward the company continues to consolidate its position in the domestic market whilst deepening its footprint across Africa doing business with over 15 countries. Prima Re is also diversifying its investment portfolio in order to maximize shareholders returns. The provision of “no premium no cover” regulations which the industry is lobbying for will strengthen the domestic market and eliminate the huge debtors’ problem in the market bringing it in line with other markets in the region. On a sad note the Directors of Prima Re do not recommend the payment of a final dividend for the year ended 31 December 2018 in view of the financial performance recorded as highlighted above. However, the Annual General Meeting of Prima Reinsurance PLC will be held on 24 May 2019 at Taj Pamodzi Hotel at 10.00 hours to discuss the way forward for the company’s 2019 financial year.