The recent introduction of Value Added Tax (VAT) on general insurance businesses in the country is posing challenges to the insurance industry.
George Otoo, Group Chief Executive Officer (CEO), Enterprise Group Limited, who disclosed this at the company’s Annual General Meeting (AGM) on Thursday in Accra, said the development would require creativity on the part of insurance companies in the country to enable them retain their clients.
‘The recent introduction of VAT on general insurance businesses represents a new challenge for the industry and will require creativity, as we will retain our clients only if they continue to see value in the services and products we offer,’ Mr. Otoo said.
Meanwhile, the Enterprise Group exceeded its revenue target significantly for 2013 as its net revenues rose to GH¢230.9m, representing a growth rate of 58.5 percent over the previous year’s growth rate.
The Group Investment Income and fair value gains constituted 29.4 percent of its net revenues.
According to Mr. Otoo, ‘The important contribution made to Group revenues was the result of a renewed management focus on investments, and another exceptional year for equities on the Ghana Stock Exchange (GES), with the GES Composite Index appreciating by 78.8 percent. Additionally, the high yields on deposits and Government treasury bills made an important contribution.’
The CEO pointed out that the adverse operating environment had impacted on the Group’s business, as net expenses increased from GH¢113.0m in 2012 to GH¢183.2m, representing a growth of 62.1 percent in 2013.
The biggest driver of this significant growth was the growth in actual liabilities, which required an increase in provisions of GH¢65.9m as against last year’s GH¢32.7m or a growth of 102 percent, he said.
Group profit-after-tax for the year was GH¢39.7m, representing a growth of 32.7 percent over the previous year.
Trevor Trefgarne, Group Chairman said: ’2014 will be a very difficult year for the economy. Although the overall objectives and policies of Government remain unchanged, critical success factors will be Government’s ability to stem leakages in revenues, eliminate perceived waste and implement the wide ranging 2014 budget measures aimed at increasing tax revenues.’
He said: ‘There are concerns over the effects of these new tax measures on business. It is therefore critical that implementation is well thought through to ensure these measures do not discourage the business sectors affected, like the financial services sector, which have contributed significantly to the growth of the economy.’
He noted that ‘due to low insurance penetration in the country the introduction of VAT is likely to slow down the growth potential of the insurance sector and government’s wish to encourage insurance of natural risks and other disasters such as fire.’
BY Melvin Tarlue
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