Lasaco Assurance Plc reaped a foreign exchange revaluation windfall of N579 million in its second-quarter operations – which enabled it to head off a loss within the quarter. The inflow provided the healing balm for a 72 percent plunge in underwriting profit quarter-on-quarter to N145 million.
The revaluation gain also covered up a 4.5 percent decline in investment income during the quarter to less than N150 million and absorbed operating expenses of N475 million during the quarter. It was the singular development that provided the strength to achieve a 28 percent increase in pre-tax profit quarter-on-quarter to nearly N400 million at the end of the second quarter.
The gain equally provided a quickening profit performance for the company at half-year. The second-quarter profit accounted for 56 percent of the pre-tax profit of N714 million that Lasaco Assurance posted at the end of June 2020.
The company’s year-on-year position at the end of half-year operations shows that it faced adverse pressures on both sides of its underwriting business and investment earnings. A major increase in unearned premiums to the tune of 54 percent hindered gross insurance premium income over the first six months of the year.
At N4.7 billion, the gross premium earned was down by 13 percent year-on-year at the end of June. With a drop also in reinsurance expenses, net premium income went down by 7 percent year-on-year to N2.7 billion at half-year.
A drop of 33 percent in fees and commissions added to the downward pressure on earnings during the period. It led to a drop of close to 12 percent in net underwriting income to N3.2 billion at the end of half-year operations.
Underwriting expenses were sticky and failed to go down with net underwriting income. Underwriting cost only went down slightly at 1.5 percent to about N1.5 billion but net claims expenses dropped by 18 percent to N652 million. The drop accounted mostly for a decrease of 7 percent in total underwriting expenses to N2.1 billion at half-year.
The strain in the underwriting business is that net underwriting income dropped well ahead of total underwriting cost at 12 percent compared to 7 percent. The result is a drop in underwriting profit by close to 20 percent year-on-year to a little over N1 billion at half-year. Much of the drop in underwriting profit occurred in the second quarter – which contributed less than N145 million to the half-year figure.
The downward pressure on earnings in the underwriting business extended to the investment arm of the company’s operations. Investment income dropped by close to 14 percent to over N296 million over the review period.
The big event in the company’s second-quarter operations is a multiplication of other income by 360 percent year-on-year to N585 million. This consists mostly of foreign exchange revaluation gain of N579 million, an upsurge from N113 million in the same period last year.
The foreign exchange gain enabled the company to absorb its operating expenses of N1.1 billion at half year and still pushed up profit. It made the difference between the drops in underwriting profit and investment earnings and an improvement of about 8 percent in pre-tax profit to N714 million at the end of June 2020.
Lasaco Assurance closed half year operations with an after-tax profit of N632 million, which is a year-on-year increase of 5.6 percent. This is already twice the company’s full-year profit of N315.7 million in 2019. The company’s profit had dropped by 57 percent last year.
The company earned over 8 kobo per share for the half-year, 2020 against 8 kobo per share in the same period in 2019. It gave out a cash dividend of 5 kobo per share to shareholders for the 2019 operations.
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