BY Mike 'Uzor
The insurance industry has not been able to establish earnings stability and the operators here generally exhibit rise and fall patterns in revenue and profit from year to year. The business is facing the challenges of a general slowdown in the economy, which is affecting performance by way of non-growing revenue and rising operating expenses. Companies tend to be differently affected from year to year by the dynamic changes in the cost-income relationship inherent in the business.
This situation gives rise to an operating climate in the insurance sector where companies swing back and forth between profit and loss on a continuing basis. There is no general earnings pattern for the operators. The year of a major profit drop for one company can be one of a big rebound for another depending on the specific cost and revenue challenges in the year.
Insurance Sector: 3rd Quarter Earnings Performance |
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| Company | Turnover Nm | Net Profit Nm | Net Profit Margin % | EPSK | Revenue Growth [y-o-y] % | Net Profit Growth [y-o-y] % |
| AIICO Ins | 21,715 | 2,694 | 21.2 | 38 | -7.1 | -0.8 |
| Continental Reinsurance | 14,715 | 1,538 | 10.5 | 15 | +26.1 | +12.8 |
| Cornerstone Insurance | 6,026 | 623 | 10.3 | 7 | +39.7 | +10.7 |
| Custodian & Allied Ins | 20,366 | 3,774 | 18.5 | 62 | +10.2 | +19.4 |
| Equity Assurance | 3,459 | -453 | -13.1 | -6 | -0.1 | -159.8 |
| Lasaco Assurance | 3,941 | 356 | 9.0 | 5 | -7.2 | +14.4 |
| Law Union & Rock Ins | 2,933 | 564 | 19.2 | 16 | +11.5 | +216.0 |
| Linkage Assurance | 3,061 | 652 | 21.3 | 8 | +17.9 | -3.6 |
| Mansard Insurance | 13,502 | 1,513 | 11.2 | 11 | -8.5 | +32.4 |
| Mutual Benefits | 10,480 | 1,295 | 12.4 | 16 | +10.0 | -28.6 |
| NEM Insurance | 7,434 | 2,107 | 28.3 | 40 | +9.5 | +32.0 |
| Niger Insurance | 8,357 | 514 | 6.2 | 6 | +5.5 | +40.4 |
| Prestige Assurance | 582 | -49 | -8.4 | -1 | -69.3 | -916.7 |
| Regency Alliance Ins | 2,667 | 464 | 17.4 | 7 | +2.5 | +14.3 |
| Royal Exchange | 8,192 | 76 | 0.9 | 1 | +8.3 | -88.4 |
| Sovereign Trust Ins | 5,321 | 475 | 8.9 | 6 | -0.2 | 29.0 |
| Staco Insurance | 5,251 | 437 | 8.3 | 7 | +11.2 | -21.5 |
| Unity Kapital Assurance | 2,294 | 266 | 11.6 | 2 | -14.0 | +376.0 |
| Wapic Insurance | 4,380 | 34 | 0.7 | 0.2 | +24.3 | -72.4 |
AIICO Insurance grew gross premium income by 42.6% in 2014 to N33.65 billion but that growth momentum appeared to be missing in 2015. Revenue declined by 7.1% at the end of the third quarter and full year estimates indicate the decline could stretch up to a 10%.
With declining revenue after tax profit slipped at the end of the third quarter but the full year outlook is promising a growth of about 60% if the third quarter growth rate is maintained. The profit figure in the third quarter was already ahead of the full year figure in 2014. The company made a big return to profit in 2014 from a loss position in the prior year.
Continental Reinsurance pushed up gross premium income by 7.4% in 2014 but suffered a sharp drop of over 51% in after tax profit during the year. In 2015, the company showed a renewed strength in earnings growth in the interims. Revenue went up by 26.1% at the end of the third quarter and after tax profit increased by 12.8% year-on-year. Revenue growth is expected to be maintained to full year. The company lost profit margin in the year and this follows a high rise of 354% in impairment charge on financial assets as well as an increase of over 50% in administrative expenses.
A rebound in profit is nevertheless expected from the company at the end of the year with after tax profit already standing more than 80% above the preceding year’s figure at the end of the third quarter. The company may report over 130% jump in profit at the end of the year if it maintained the third quarter growth rate.
Cornerstone Insurance showed a stable growth in revenue and profit in the 2015 interim reports. In 2014, it improved gross premium income by 12.3% to N5.19 billion and increased after tax profit by 10.5% to about N0.95 billion. In 2015, revenue growth accelerated to 39.7% in the third quarter but growth is expected to slow down to about 16% at full year.
After tax profit grew at a slower pace that revenue at 10.7% in the third quarter, as net claims expenses soared by 171% and net underwriting cost rose by nearly 50%. Profit margin declined from 23% in the same period in 2014 to 16.7% in the third quarter and the full year outlook indicates a likely decline in profit for Cornerstone Insurance in 2015.
Custodian & Allied Insurance could not grow the top line in 2014 but it is expected to step up growth in 2015. Against a flat growth of 2.1% in gross premium income in 2014, the company recorded an increase of 10.2% at the end of the third quarter of last year. It is likely to maintain that growth rate to full year.
The company grew profit by 13.6% in 2014 to N4.09 billion and profit growth equally accelerated to 19.4% at the end of the third quarter. The strength to grow profit ahead of revenue in the year came from moderated growths in management expenses and operating cost. Profit growth is expected to accelerate further to 27% for the 2015 financial year.
Equity Assurance finished the 2014 financial year with good news of a turnaround from a loss position in the preceding year and a strong growth in revenue. Gross premium income grew by 20.8% to N4.93 billion during the year and the bottom line shifted from a loss of about N438 million to a profit of N183 million. In 2015, the reverse is the case, slipping from profit back into a loss. Revenue failed to grow at the end of the third quarter and the company plunged into a net loss of N453 million. An increase of 34% in operating expenses and a growth of 43% in finance cost accounted for the loss. The company is not likely to return to profit at full year.
Lasaco Assurance built a bigger profit from lower revenue in 2014 than it did in the preceding year. Gross premium income declined by 9.6% to N4.83 billion while after tax profit advanced by 63% to N446 million. The earnings pattern of 2014 is expected to be sustained in 2015. Gross premium income declined by 7.2% to N3.94 billion year-on-year at the end of the third quarter but after tax profit grew by 14.4% to N356 million.
An increase of 31.5% in net premium income provided the strength to grow profit ahead of revenue during the period. Despite the year-on-year drop in the third quarter, the company is expected to grow revenue by about 14% at full year and after tax profit may grow by about 10%.
Law Union & Rock Insurance had a down year in 2014 in which it lost 3.7% of its prior year’s revenue and profit sank by 73.5%. Fiscal 2015 was however one of an upturn for the company with revenue up by 11.5% to N2.93 billion and after tax profit more than tripling at 216% to N564 million at the end of the third quarter.
Profit already stood at 351% above the full year figure in 2014 as at the end of the third quarter. A 59% increase in underwriting profit, a 23% growth in investment income and an 80% rise in other operating revenue provided the profit boost. The full year outlook indicates the company may achieve one of the highest profit advances among listed companies in 2015 – as much as 490%. The company lifted net profit margin from 3.5% at the end of 2014 to 19.2% at the end of the third quarter.
Linkage Assurance recorded an increase of 13.4% in gross premium income in 2014 to N3.05 billion but profit dropped by 22% to N325 million during the year. The pattern of growing revenue and losing profit was still running for the company as at the third quarter of last year. At the end of September, the company reported an increase of 18% in revenue but after tax profit again went down by 3.6%.
The year-on-year profit decline was caused by a drop of 47% in underwriting profit. The company lost profit margin from 15.2% in 2013 to 10.5% in 2014 but profit margin pushed up to 21.3% at the end of the third quarter of last year. Despite the year-on-year profit drop, an outstanding growth is expected at full year. Net profit was already double the full year profit of 2014 at the end of the third quarter. Profit may advance by as much as 270% at the end of the year.
Mansard Insurance achieved a strong growth of 28% in gross premium income to N17.40 billion in 2014 but profit dropped by 22% to N1.62 billion. The reverse was the case for the company at the end of the third quarter when revenue declined by 8.5% but profit grew by 32.4%. An advance of 55% in investment income and an increase of 12% in net premium earned powered the strong growth in profit seen at the end of the third quarter.
Net profit margin improved from 9.3% at the end of 2014 to 11.2% at the end of the third quarter. The full year expectations are an increase of 6% in revenue and a growth of 36% in after tax profit.
Mutual Benefits Assurance recorded an outstanding performance in 2014 when its revenue advanced by 102% to N15.53 billion and after tax profit surged up by over 645% to N4.10 billion. The company maintained revenue growth in the course of the 2015 financial year but profit came under pressure from provisions and management expenses. Revenue grew by 10% at the end of the third quarter but after tax profit dropped by 28.6%.
The full year outlook indicates a flat growth in revenue and a drop of over 50% in after tax profit for Mutual Benefits Assurance. Net profit margin went down from 26.4% at the end of 2014 to 12.4% at the end of the third quarter of last year.
NEM Insurance reported one of the highest profit advances in 2014 at N280% to N1.52 billion from an improvement of 25.4% in revenue to N9.77 billion. The company maintained growth in both revenue and profit in 2015. Gross premium income was up by 9.5% year-on-year in the third quarter and profit grew ahead of revenue at 32% to N2.1 billion during the period.
The company has raised profit margin from 15.6% at the end of 2014 to 28.3% at the end of the third quarter. Revenue growth is expected to slow down to a moderate increase at full year while after tax profit is likely to advance by over 90%.
Niger Insurance improved gross premium income by 5.9% to N11.06 billion in 2014 and profit grew slightly faster by 9.5% to N691 million. Revenue growth showed a moderated behaviour in 2015 but profit growth accelerated. The company closed third quarter operations with an improvement of 5.5% in revenue while after tax profit rose by 40.4% to N514 million.
Profit margin improved on year-on-year basis in the third quarter but remained unchanged from the full year position at the end of the preceding year. Based on the third quarter performance, after tax profit is likely to be flat for the company at full year despite the strong year-on-year growth. Revenue is equally expected to close flat at the end of 2015.
Prestige Assurance lost revenue in 2014 but succeeded in pulling out of the red into a light blue at the end of that year. Gross premium income fell by 37% in the year while the company turned around from a loss of N91 million in 2013 to a profit of N14., The revenue losses worsened in 2015 and the company went back into the red. Gross premium income dropped by 69.3% at the end of the third quarter and a loss of N49 million occurred during the period.
Drops in all the income lines are the problem, as costs are well under control. The company is likely to close the 2015 financial year with a bigger loss than reported in the third quarter.
Regency Alliance Insurance closed 2014 operations with an increase of 14% in revenue to N4.31 billion but the company lost 6.4% of its preceding year’s profit to close at N439 million. In 2015, the company was unable to grow revenue as per the interims but after tax profit was up by 14.3% to N464 million at the end of the third quarter.
With a gain in profit margin from 10% at the end of 2014 to 17.4% at the end of the third quarter, a strong growth in profit is expected at full year despite that revenue performance is likely to worsen in the final quarter. Based on the third quarter growth rate, the company may record a drop of 14% in revenue at the end of 2015 but after tax profit is expected to grow by over 40%.
Royal Exchange saw a profit crash of 81.5% to N150 million in its 2014 operations when revenue improved moderately by 3.7% to N9.42 billion. High growth in impairment allowance and an increase of 22% in management expenses caused the sharp drop in profit. Revenue stepped up at an increase of 8.5% year-on-year at the end of the third quarter but another profit crash of 88.4% happened during the period.
Revenue is expected to accelerate at the end of 2015 for the company to about 17% while profit drop may reduce to 29%. The profit weakness is coming from a shift from a net gain to a net loss on financial assets and a similar shift in net impairment allowance.
Sovereign Trust Insurance recorded a drop of 68.3% in after tax profit to N295 million in 2014, which was induced by an 87% rise in claims expenses in the year. This was against a moderate increase of just 3% in revenue during the year. Revenue remained flat in the 2015 financial year as at the end of the third quarter and that resulted in a drop of 29% in net profit.
One major rising cost undermined the company’s profit capacity in the year. That is reinsurance cost, which grew by 32.5% and caused a drop of 23.1% in net premiums earned. It also accounts for a drop of 18.7% in net underwriting income. Revenue is expected to be flat at full year at the third quarter growth rate but a big recovery in profit can be expected. The third quarter profit figure was already 64% above the full year profit in 2014. Profit is expected to more than double at the end of the year.
Staco Insurance recorded a weak revenue growth of 4.6% to N6.15 billion in 2014 but the company’s profit fell by 61% to N185 million in the year. A drop of over 74% in other income accounted for the profit drop in the year. Gross premium income improved by 11.2% in the third quarter of 2015 but profit again dropped by 21.5% during the period.
Increased claims and underwriting expenses eroded profit margin and led to the drop in profit in the third quarter. The full year outlook indicates that revenue will step up to 15% growth and there will be a rebound in profit despite the year-on-year drop. After tax profit in the third quarter exceeded the full year figure last year by 123% and may advance by more than 220% at full year.
Unity Capital Assurance improved revenue by 4.1% to N3.02 billion in 2014 but after tax profit dropped by 46.2% to N141 million. The profit drop follows a drop of 73% in investment and other income. In 2015, the earnings pattern was reversed to a drop of 14% in gross premium income and a recovery/growth of 376% in profit in the third quarter from a loss position in the same period in 2014.
The strength came from a drop of 42% in management expenses and provision for doubtful accounts and a drop of 26% in net claims incurred. The company is expected to close the 2015 trading with a moderate improvement in revenue and profit is estimated to advance by more than one and half times.
Wapic Insurance returned to profit in 2014 with a new operating strength provided by a drop of 53% in net claims expenses and a major improvement in other operating income. An increase of 38.3% in gross premium income to N5.20 billion also empowered a 214% profit recovery during the year. At the end of the third quarter of 2015, the company grew revenue by 24.3% but after tax profit dropped by 72.4% during the period.
The profit fall in the third quarter interim was caused by a 114.2% growth in net claims expenses as well as a rise of 69% in other operating cost. Revenue is expected to grow by 14% at the end of the year but profit is expected to double.
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