By Zainab Iwayemi
Axa Mansard, a composite risk underwriting firm, has reported its third quarter 2020 trading activities showing an after-tax profit of N5.7 billion, an amount which is nearly double its 2019 full-year profit despite the lockdown occasioned by Covid-19 and the #EndSARS protest.
On the back of this, the insurance firm has projected a N2 billion increment in the full year, which would translate to an expected closing profit of N8 billion at the end of 2020, equivalent to the company’s profit in the preceding three years put together.
The profit performance in the 2020 financial year indicates lots of achievements with regards to cost and income. During the year, the company recorded profit in every quarter as it accelerated from 120 per cent year-on-year in the first quarter, to 154 per cent advance at half-year. It then jumped 169 per cent at the end of the third quarter.
In 2019, the net underwriting income grew well ahead of underwriting expenses at 21 per cent at the end of the third quarter. However, in 2020 the net underwriting expenses slowed down drastically from a 42 per cent increase at the end of the previous year to 12.5 per cent at the end of September 2020.
The robust growth of 63 per cent year-on-year at the end of the third quarter of 2020 could be attributed to the major shift in the company’s cost-income structure, which led to accelerated underwriting profit from the marginal increase of less than three per cent.
Additionally, the performance of investment saw a strong positive shift in income. The total investment income accelerated from 44 per cent at half-year to over 64 per cent at the end of the third quarter to close at N6.6 billion.
The sustainable moderation of management expenses, which is another pointer to profit-building showed that total expenses declined in the third quarter from less than 10 per cent year-on-year at half year to 4 per cent or N5.9 billion – an indication of continuous reduction in cost of generating naira income while earnings increase.
The company’s third quarter net premium income therefore stood at N23.7 billion. The figure indicates a year-on-year growth of 24 per cent, a consistent growth for years, though, a fall in fee and commission income reduced the growth rate in net underwriting income by 21 per cent to N25 billion, at the end of the period.
While the claims and underwriting expenses slowed down by over 50 per cent and 7 per cent, to 23 per cent and a flat respectively, at the end of June to the end of September, pressure, however, came from a dry-up of reinsurance recoveries of claims as well as a major change in annuity reserve as the company ended the third quarter operations with net underwriting expenses of N18 billion, a 10 per cent increase year-on-year.
This marks a major development for the company as it represents a slowdown in net underwriting expenses as net underwriting expenses claimed 72 per cent of net underwriting income at the close of the third quarter, 2020 compared to 79 per cent in the same period of 2019; leading to a 63.4 per cent advance in underwriting profit year-on-year to N7 billion at the end of the third quarter.
Similarly, the investment earnings also witnessed an uptrend as the total investment income rose by 64.4 per cent year-on-year to N6.6 billion at the end of September, as against the static growth in investment earnings in 2019.
The major driver of investment income for the year are: the net gain on investment property, which turned around from the contrasting N78 million to N836 million year-on-year, and the net gains on the financial instrument, which multiplied four times from negative N254 million to N775 million over the same period.
The total operating cost at the end of the period was N5.9 billion, indicating a further slowdown in operating expenses as it continued to reflect declining market and administrative expenses, which went down by 27 per cent at the end of the third quarter to close at N1.1 billion.
Consequently, the group’s after-tax profit climbed by 169 per cent to N5.7 billion at the end of the third quarter compared to an after-tax profit of N2.9 billion at the close of 2019 operations. Similarly, the earning per share rose from 18 kobo to 50 kobo at the end of September 2020.