AXA Mansard Insurance Plc lost roughly N1.4 billion in the final quarter, which slashed its 3rd quarter after-tax profit of N5.7 billion for the group to N4.3 billion at full year. This is a disappointing record for the company that expected to extract a profit of N2 billion from the final quarter according to its forecast.
The realised profit is nevertheless a top growth record of close to 48 per cent for the year – the strongest profit growth rate for the company in four years. The unaudited fourth-quarter report shows a defiant performance by the composite risk underwriting firm out of the generally difficult earning season that marked the 2020 financial year.
The performance presents a good harvest for shareholders for the year, who injected new money in the company’s recapitalisation programme last year. It is accelerated growth in profit from a 17 per cent improvement in 2019. The company could not finish the year on the high-speed profit growth track it followed up to the third quarter.
It had grown profit at galloping speed from 120 per cent year-on-year in the first quarter to 154 per cent at half-year and further to a jump of 169 per cent at the end of the third quarter. The company did not maintain some of the favourable developments in the interims on both sides of costs and incomes to a full year.
These include underwriting expenses, which reversed from a slowdown at the end of the third quarter to an increase in the final quarter. That raised the growth rate in net underwriting expenses from 12.5 per cent at the end of September to 17 per cent at full year.
At the same time, net underwriting income slowed down from an increase of 21 per cent at the end of the third quarter to less than 18 per cent at full year. The effect of these changes is a strong deceleration in underwriting profit.
Robust growth of 63 per cent in underwriting profit year-on-year at the end of the third quarter, went down to 22.6 per cent at the end of the year.
The earnings weakness in the final quarter extended to investment income. From atop record growth of 64 per cent at the end of the third quarter, total investment income slowed down drastically to 12.6 per cent at the full year to close at slightly over N7 billion.
The company however sustained the moderation of management expenses recorded in the interim reports to a full year. Total management expenses slowed down further in the final quarter from 4 per cent increase at the end of the third quarter to flat at full year.
The reduction in the cost of generating the company’s naira of income enabled it to achieve strong growth in profit despite the limiting developments in the final quarter.
The final quarter operations of AXA Mansard Insurance to December 2020 closed with a net premium income of N31.7 billion. This represents a year-on-year growth of 20 per cent, which is a sustained strong revenue growth for the company in recent years.
A drop of 11.6 per cent in fee and commission income to about N1.6 billion reduced the growth rate in net underwriting income to 18 per cent to close at over N33 billion at the end of the financial year.
Net claims expenses slowed down from a 23 per cent increase at the end of September to 12 per cent at the full year to close at below N20 billion. Underwriting expenses posed the problem in the final quarter, moving from flat at the end of the third quarter to a 30 per cent increase to close at almost N6 billion.
With major changes in individual life and annuity reserves, net underwriting expenses gained speed upward in the final quarter. The company closed the full year with net underwriting expenses of N25.8 billion, which is an increase of 17 per cent year-on-year, accelerating from 10 per cent at the end of the third quarter.
The figure reflects the increase in net underwriting expenses – which is a major downside development for the company in the final quarter. Net underwriting expenses claimed 77.5 per cent of net underwriting income at the end of the year, rising from 72 per cent at the end of the third quarter.
The cost increase caused a major weakening of underwriting profit at the end of the year. There was a sharp slowdown in underwriting profit from over 63 per cent advance at the end of the third quarter to 22.6 per cent improvement at full year. This is nevertheless a strong performance from an increase of only 3 per cent in underwriting profit in the 2019 financial year.
A big upturn in investment earnings at the end of the third quarter thinned down at full year. Total investment income decelerated from 64.4 per cent growth year-on-year at the end of September to 12.6 per cent to N7.1 billion at the end of the year.
Investment income was affected by the swelling of net losses in investment property in the year by over five and half times to N2.2 billion.
The company could not maintain the level of cost-saving that pushed up operating profit by 186 per cent at the end of the third quarter. Operating profit slowed down to 50 per cent growth at the end of the year to close at N6.6 billion.
The group’s after-tax profit grew by 47.7 per cent to N4.3 billion at the end of the 2020 financial year. The company closed the 2019 operations with an after-tax profit of N2.9 billion.
Earnings per share amounted to 20 kobo for the year, which is a drop from 26 kobo per in 2019. The drop in earnings per share reflects an increased volume of shares from the recapitalisation exercise.
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