The insurance market may lose some players in the next few years, if a plan headed by the National Insurance Commission (NIC) to encourage consolidation through minimum capital requirements is successful. The list of leading insurers is also expected to change after some potential mergers and acquisitions. “Five of the big companies control about 65% of the market, so with the new rules there might be one or two of the smaller companies that will become interesting targets for acquisition,” said Steve Kyerematen, the managing director of Activa Insurance. For now the State Insurance Company (SIC), Star Assurance and Enterprise Insurance are the non-life market’s biggest players by gross premium income. In the life segment, SIC Life and Enterprise Life are joined by GLICO Life as the top three.

SIC: SIC was once a state-owned enterprise created to insure government risks, but has transitioned to a private sector company. A share sale in 2007 transferred a 60% stake from the government to private investors, but the firm has retained its dominant position among Ghanaian insurers, as has its life insurance counterpart, SIC Life. SIC’s GHS64m ($37.95m) in gross premium income in 2010 represented 23.6% of the industry’s total – more than twice the market share of its nearest competitors. For 2011 it reported a net profit of GHS5.87m ($3.48m), down 4.9% from GHS6.17m ($3.66m) in 2010. Revenue increased from GHS52.3m ($31.01m) to GHS65.6m ($38.89m); however, claims and charges rose by 54%, and operating expenses by 20%, according to the company’s annual income statement. Earnings per share were unchanged at GHS0.03 ($0.02).

Improvements for 2012 include the creation of a risk management department. “This is something that would be helpful for the whole industry, which is in need of more risk-based supervision,” the acting CEO, Doris Awo Nkani, told OBG. “Because of the extreme competition, rates are getting pushed down a lot.” SIC has also been planning to expand into Sierra Leone and Liberia.

SIC is one of two insurers to trade on the Ghanaian Stock Exchange (GSE). The shares opened 2012 at a high of GHS0.4 ($0.24) and had slumped to GHS0.32 ($0.19) by late July. SIC’s return on assets was 6% in 2010, against an industry average of 2%. In many other of the common performance metrics used by the NIC, however, the company was average or below average.

STAR ASSURANCE: Star, incorporated in 1984, has been one of the fastest-growing insurers in Ghana in recent years. Its GHS28.16m ($16.7m) in gross premium income in 2010, a 10.4% market share, pushed it slightly past Enterprise Insurance into second place behind SIC in terms of market share. The company’s recent strategy has included getting a credit rating, which only a handful of major Ghanaian firms have done. Star was rated an A by Global Credit Rating, a South Africa-based firm. Richard Adu-Marfo, the head of research and reinsurance at Star, echoed others in the market in remarking on the highly competitive nature of the auto segment, where price wars are common and margins are very low as a result. He said motor makes up 50% of Star’s business, but 60% to 70% of its profits come from elsewhere. The firm’s claims ratio in 2010 was 10%, against an industry average of 17%, according to NIC data. SIC’s ratio was 20% and Enterprise Insurance’s 27%. Star led the industry in return on equity, at a rate of 36% compared with an average of 4%.

ENTERPRISE INSURANCE: This company is a pioneer in Ghana, having been set up in 1924 during the country’s colonial era as an offshoot of the UK’s Royal Exchange Assurance. It is now a subsidiary of Enterprise Group, a financial services holding firm that also owns a life insurer, a pension funds trustee and a real estate asset manager. Enterprise is a diversified non-life underwriter and has been marketing itself on customer service – the company promises a three-day settlement process for auto claims, for example. It had a gross premium income of GHS28.16m ($16.7m) in 2010, and as a whole the group reported a jump of 44.9% in net premium income in 2011 and an after-tax profit that more than trebled, going from GHS8.4m ($4.98m) in 2010 to GHS25.7m ($15.24m) in 2011. On a per-share basis the increase was from GHS0.03 ($0.02) to GHS0.15 ($0.09). In its annual earnings statement Enterprise Group cited a growth rate of 53.4% for its life insurance company and 22.4% for its non-life business. The parent group and SIC are the only two publicly traded insurers in Ghana. The company’s shares have slid from about GHS0.38 ($0.23) in January 2012 to GHS0.28 ($0.17) in June, albeit on light volume: only in April and May did more than 300 shares change hands.

Enterprise’s expense ratio, which stood at 32% was an area of strength in 2010, according to NIC data. The firm’s capital-to-liabilities ratio, at 2.6%, is more than double the industry average of 1%.

SIC LIFE: The largest life insurer, SIC Life’s GHS48m ($28.46m) in gross premium income accounted for 25.6% of the total split by the country’s 17 life-insurance providers as of 2010. That total advanced to GHS71.9m ($42.63m) in 2011, representing a 49.8% jump. The company was split from its parent, SIC, and established as a stand-alone life insurer in 2007. Its branch network includes locations in Accra, Tema, Takoradi, Tamale, Sunyani, Kumasi, Techiman and Tarkwa. The company’s expense ratio stands out among performance indicators as of the regulator’s 2010 annual report, at 22%, compared with an industry average of 43%. In the 2007-10 period the company’s ratio has been at about 20 percentage points lower than that of its peer group. Its return on equity has been above the industry standard in three out of those four years as well, and came in at -5% in 2010, compared with the peer-group average of -10%.

ENTERPRISE LIFE ASSURANCE: With GHS40.1m ($23.78m) in gross premium income in 2010, Enterprise Group’s life insurance company accounted for 21.4% of market share. In 2000 Enterprise Life was incorporated as part of a deal orchestrated by global development firm International Finance, which also folded in a life insurer called African Life. It has six branch offices and five sales offices. The company markets itself on a promise to pay claims within 48 hours, similar to others in the Ghanaian market that are trying to move away from competing on price to competing on service quality. In a comparison of performance metrics, Enterprise Life stood out for its efficient management, with a 2010 expense ratio of 23%, 20 percentage points below the industry average. The company also maintained an above-average return on equity over the 2007-10 period evaluated in the NIC’s annual report. The figure was 55% in 2010, against an industry average of -10%.

GLICO LIFE: The third-largest life insurer is GLICO Life Insurance, founded in 1987, making 2012 its 25th year in business. It is part of the larger financial services conglomerate GLICO Group, which also includes a general insurer and units dedicated to pension trusteeship, health care and real estate asset management.

Its GHS21.1m ($12.51m) in gross premium income in 2010 accounted for 11.2% of the total. The number expanded to GHS34.2m ($20.27m) in 2011, a 62% surge. For 2011 the company reported an 18% growth in assets to GHS70.8m ($41.98m). Claims paid increased to GHS14.8m ($8.77m) from GHS11m ($6.52m). Two new branches were opened in 2011, bringing its national network of locations to 21. Its products include end-of-service benefit plans, education endowments, loan protection, travel insurance, comprehensive plans and a microinsurance product called Anidaso.

GLICO partnered with Care International, a non-governmental organisation working to eradicate poverty, to offer the insurance. GLICO’s expense ratio in 2010 was 27%, well below the average. The firm’s return on equity in 2010, -5%, bested the -10% industry average.