AXA Mansard Insurance Plc is expecting the biggest harvest for shareholders in years in 2020, a defiant performance in a lean year for corporate earnings. The composite risk underwriting firm closed the third quarter trading with an after-tax profit of N5.7 billion for the group – nearly double the full-year profit in 2019.
It forecasts to top the figure up by N2 billion in the full year, meaning an expected closing profit in the region of N8 billion at the end of 2020. That will be the company’s profits in the preceding three years put together. Shareholders haven’t seen corporate harvest that big in many years.
The company has gained speed on the profit growth track every quarter so far in the year. Profit keeps accelerating from 120 per cent leap year-on-year in the first quarter to 154 per cent advance at half-year to a jump of 169 per cent at the end of the third quarter.
The company’s defiant profit performance in the bad earning season of the 2020 financial year reflects many favourable developments on the sides of costs and incomes.
Net underwriting expenses have slowed down drastically from a 42 per cent increase at the end of last year to 12.5 per cent at the end of September. Unlike last year, net underwriting income is growing well ahead of underwriting expenses at 21 per cent at the end of the third quarter.
The major shift in the cost-income structure of the company has quickened underwriting profit from a marginal increase of less than 3 per cent last year to the robust growth of 63 per cent year-on-year at the end of the third quarter.
There is also a strong positive shift in the performance of investment income. Against flat investment income last year, total investment income advanced further 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 at the end of September 2020.
The third element of the company’s profit-building tripod is a sustaining moderation of management expenses. Total management expenses slowed down further in the third quarter from less than 10 per cent year-on-year at half year to 4 per cent to N5.9 billion. This means the company continues to reduce the cost of generating its naira of income while earnings keep improving.
Third-quarter operations of AXA Mansard Insurance to September 2020 closed with a net premium income of N23.7 billion. This represents a year-on-year growth of 24 per cent, 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 21 per cent to N25 billion at the end of the period.
Claims expenses slowed down considerably from rapid growth of over 50 per cent year-on-year at the end of June to 23 per cent at the end of September. Underwriting expenses also slowed down from 7 per cent to flat over the same period.
Pressures, however, came from a dry-up of reinsurance recoveries of claims as well as a major change in annuity reserve. The company closed the third quarter operations with net underwriting expenses of N18 billion, which is an increase of 10 per cent year-on-year.
It represents a slowdown in net underwriting expenses – which is a major positive development for the company this year. Net underwriting expenses claimed 72 per cent of net underwriting income at the end of the third quarter compared to 79 per cent in the same period last year.
The cost-saving powered a 63.4 per cent advance in underwriting profit year-on-year to N7 billion at the end of the third quarter. This is a big rebound from an increase of only 3 per cent in underwriting profit the company recorded at the end of 2019.
A big upturn is also happening in the company’s investment earnings. Total investment income rose by 64.4 per cent year-on-year to N6.6 billion at the end of September. This is against flat growth in investment earnings in 2019.
Two main income lines are driving investment income this year. Net gains on investment property turned around from negative N78 million to N836 million year-on-year. Also, net gains on financial instruments multiplied four times from negative N254 million to N775 million over the same period.
A further slowdown in operating expenses continued to reflect declining marketing and administrative expenses, which went down by 27 per cent at the end of the third quarter to close at N1.1 billion. Total operating cost closed at N5.9 billion at the end of the period.
This is a further cost saving for the company in the third quarter– which pushed up the rapidly growing operating profit further from 172 per cent at half-year to 186 per cent advance to N7.6 billion at the end of the third quarter. This compares with the full-year operating profit figure of N4.4 billion in 2019.
The group’s after-tax profit advanced by 169 per cent to N5.7 billion at the end of the third quarter. It closed the 2019 operations with an after-tax profit of N2.9 billion.
Earnings per share amounted to more than 50 kobo at the end of September 2020, rising from 18 kobo per share in the same period last year. The company expects to close the 2020 financial year with earnings per share of 68 kobo.
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