AXA Mansard Insurance Plc gained further speed on earnings growth in the second quarter and maintained the elevated performance track on which it began this year in the first quarter. Profit swelled further from a leap of 120 percent in the first quarter to 154 percent advance year-on-year to N3.6 billion at half-year.
The company’s half-year profit at the end of June 2020 has already exceeded the full-year figure of N2.9 billion for the 2019 operations. The company’s improved profit capacity reflects a major shift in the cost-income structure so far this year.
Last year, net underwriting expenses grew well ahead of net underwriting income at 42 percent compared to 31 percent. That permitted only a marginal increase of less than 3 percent in underwriting profit.
This year, net underwriting income has overtaken net underwriting costs at 25.7 percent growth year-on-year compared to 11.5 percent. This has quickened underwriting profit from the marginal increase last year to the outstanding growth of 88 percent at half-year.
There is a further positive shift for the company in respect of the performance of investment income. The company closed last year’s operations with a total investment income flat at N6.3 billion. Breaking free from the stagnant posture of last year, total investment income advanced by 44 percent to stand at over N4 billion at the end of half-year operations in June 2020.
The third element driving the company’s robust profit growth this year came from a moderated growth in management expenses. Total management expenses grew by less than 10 percent year-on-year at the end of June, well below the growth in revenue. This means it cost the company significantly lower to generate its naira of income at half-year than it did in the previous financial year.
Half-year operations of AXA Mansard Insurance to June 2020 show a net premium income of N15.7 billion. This represents a year-on-year growth of roughly 30 percent, which is a continuing strong growth for the company in recent years. A drop-in fee and commission income reduced the growth rate in net underwriting income to 25.7 percent to N16.6 billion at the end of the period.
Claims expenses are on a rapid growth this year at over 50 percent year-on-year at the end of June but recoveries from reinsurers have made a big difference between this year and the prior year. That plus a moderate increase of 7 percent in underwriting expenses and a major drop in changes in life reserves lowered growth in net underwriting expenses to 11.5 percent. The company closed the half-year operations with net underwriting expenses of under N12 billion.
A slowdown in net underwriting expenses is a major positive development for the company this year, having posed a big hurdle on the profit track in 2019. Net underwriting expenses claimed a reduced share of net underwriting income at 72 percent at the end of half-year compared to 81.5 percent in the same period last year.
The cost-saving swelled underwriting profit by 88.4 percent year-on-year to N4.6 billion at half-year. This is against a moderate increase of 3 percent in underwriting profit the company recorded at the end of 2019.
In our outlook for the company last year, we had posited that “underwriting profit needs to accelerate in the coming quarters for the company to maintain the moderate improvement to full year”. We considered weak growths in underwriting profit and investment income the key factors that presented quite a difficult profit terrain for AXA Mansard Insurance in 2019.
The company’s performance so far this year has overwritten these weaknesses. At over N4 billion at half-year, total investment income rose by 44 percent year-on-year from flat growth in 2019. The main growth drivers of investment income are net gains on investment property and net gains on financial instruments. These grew by 756 percent to N846 million and 179 percent to N329 million respectively over the period.
Moderated growth in operating expenses was led by a drop of 24 percent in marketing and administration to N739 million. This is a further cost saving for the company – which lifted operating profit a clear 172 percent to N4.8 billion at half-year. This is already above the full-year operating profit of about N4.4 billion the company posted at the end of 2019.
The company raised after-tax profit by 154 percent to N3.6 billion at the end of half-year, 2020. The figure is also well above the full-year after-tax profit figure of N2.9 billion the company earned in 2019.
The company earned roughly 31 kobo per share at the end of June 2020, rising from over 12 kobo per share in the same period last year. It earned 26 kobo per share at the end of the last financial year.
AXA Mansard Insurance provides life and general business risk management solutions and other financial services. The company operates through four subsidiaries that make up AXA Mansard Group. Its services cover insurance, asset management, health insurance, property development,n and pension fund administration and management.
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