Dissecting the surging growth of life annuity fund in the last 5yrs

The insurance industry is currently undergoing a surge in growth in the area of life annuity fund.

The fund which is usually regarded as different payments at intervals paid to the insurance company while the purchaser is alive has recorded tremendous growth in the last five years.

Details of the insurance industry life annuity fund portfolio as posted on the website of the National Insurance Commission (NAICOM) by the Commission’s head of corporate communications, Rasaaq Salami shows that the fund grew to ₦322,918,475,660.72 in Q2, 2019. 

This represents 17.46% from ₦274,918,556,624.90 as at end of Q4, 2018. 

In the year under review, the cumulative total Retiree Life Annuity RLA payouts stood at ₦122,094,395,111.31 as at end of Q2, 2019.   

“The RLA market has been in existence since the advent of the Contributory Pension Scheme (CPS). The RLA portfolio so far has recorded 73,554 contracts purchased for a total premium of ₦341,615,154,821.14 as at end of Q2, 2019. This depicts 13.02% and 6.21% growth in count and volume, respectively in 2019 from end of Q4, 2018.   

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“The growth (i.e. YoY) during the last three years for RLA business has averaged 34.28% and 35.12% in count and volume respectively, while RLA fund portfolio growth has averaged 27.46% notwithstanding the RLA payouts made (i.e. cumulative total payments of ₦122,094,395,111.31 as at end of Q2, 2019). 

“Retiree Life Annuity is an insurance product and one of the available retirement benefit options for retirees which can be purchased from a Life Insurance Company licensed by the National Insurance Commission (NAICOM) and authorized to sell RLA under the regulation on retiree life annuity,” NAICOM said in a statement by it’s head of corporate communications Rasaaq Salami.

Surging growth 

A breakdown of the growth from 2014 to Q2 2019 by Daily Times shows that in 2014, the fund had a total number of 13,264 contracts and also a premium of 69.28bn. as a result, 9.43bn was received as estimated annuity payment. As a result a net premium of 62.74bn was realized which resulted in a net balance of Retiree Life Annuity of N62.74bn.

In 2015, 13,743 contracts were received with a premium amount of 61.353bn. This amounted to 12.385bn as the estimated annuity payment made. 

Also cumulative contracts in that same year increased to 27,007 which represents a 103.6 per cent increment. As such, the cumulative premium amount received was 130.638bn which shows an 88.5 per cent increase. 

In the same year under review, estimated cumulative annuity payments made was N21.818bn, with a Year on Year (YoY) percentage of 131.30 per cent. As a result, N108.82bn stood as net premium balance while fund balance stood at N135bn.389bn, just as percentage growth rate was placed at 115.7 per cent.

In the succeeding year, 12,080 number of contracts were received for the portfolio funds which led to 53.77bn as premium amount received. Estimated annuity payment was N20.139bn, as well as a cumulative contract of 39,687 which represented a 44.73 per cent increase.

In the same vein, cumulative premium amount received was N184.41bn with a percentage of 41.16. This translates to cumulative annuity payment of 41.957bn, with a Year on Year (YOY) of 92.3% and a net premium balance of 142bn. Also fund balance was 152.79bn, showing a 12.86 per cent growth.

In 2017, 12,366 contracts were recorded. As a result N63.843bn premium amount was received with an estimated annuity payment of 24.53bn. As such, cumulative contracts was pegged at 51,453 with 31.64 per cent. Also, N248.2bn was received as cumulative premium amount received representing a 34.6 per cent Year on Year growth. 

Estimated cumulative annuity payments made was N66.49bn, depicting a 58 per cent growth, just as N181.7bn remained as net balance. Fund balance was N225.67bn representing a 47.70 per cent.

Further breakdown of the portfolio fund by Daily Times shows that a total of 13,625 contracts were received in 2018 which resulted to 73.39bn received as premium amount. Estimated annuity payment was 35.47bn as cumulative contract received was pegged at 65,078 representing 26.48 per cent.

Cumulative premium amount received in 2018 was N321.65bn representing 29.57 per cent. Also, N101.97bn was received as estimated cumulative annuity payment representing 53.3 per cent, just as fund balance stood as 274bn representing a 21.82 per cent growth.

As at the second quarter of 2019 (Q2 2019), 8,476 contracts have been received so far which results in N19.96bn as premium amount received.

Also, 20,119bn was received as estimated annuity payment while cumulative contracts stood at 73,554 were received representing a 13.02 per cent growth.

In the same vein, N341.6bn have so far being recorded as cumulative premium amount which reflects a 2.21 per cent Year on Year (YoY) growth.

Estimated cumulative annuity payments made stood N122.09bn representing 19.7 per cent. Net preium balance was pegged at N219bn while fund balance for Retiree Life Annuity (RLA) currently stands at N322.918bn representing a 17.46 per cent growth.

In addition, insurance experts have also projected a further 20 per cent growth of the retirement life annuity fund as many people have shown growing interest in securing a better retirement in the future.