NEM Insurance Plc built a big profit in the final quarter of 2020 that reversed the setback it suffered in the third quarter and registered the biggest profit for the company in years. A final quarter profit of roughly N3 billion accounted for 73 percent of the full-year profit of N4 billion in the year.
It is a final quarter surprise by the risk underwriter that was headed for a profit drop at the end of the third quarter. It made a long upswing from a net loss of over N446 million in the third quarter to the net profit of N3 billion in the final quarter.
A big leap from an after-tax profit of N1.1 billion at the end of the third quarter to a net profit of over N4 billion at full year is a pleasant surprise from NEM Insurance in 2020. This is the biggest profit figure the company has seen in several years.
The big event in the final quarter that produced the exceptional profit performance is a fair value gain of N1.3 billion compared to N170 million in the corresponding quarter in the preceding year. This was supported by a drop of as much as over 56 percent in claims expenses quarter-on-quarter in the fourth quarter.
The drop in claims expenses enabled the company to lift underwriting profit for the quarter by one-half. The third factor in the outstanding performance in the final quarter came from a drop of 47 percent in operating and administrative expenses.
Big revenue gain and big cost reductions were the summaries of the company’s earnings story in the 4th quarter of 2020. The outcome is that the pre-tax profit for the quarter, at N3.5 billion, was in excess of the gross premiums written below N3.3 billion for the quarter.
The company’s unaudited financial report for the 2020 financial year shows a gross premium income of N21 billion. This represents an increase of 9 percent for the year and a sharp slowdown from 34 percent growth at the end of the 2019 financial year.
A 6 percent drop in reinsurance expenses during the year improved net premium income by 17 percent to N14.7 billion at the end of the year. With a 7 percent increase in fee and commission income, the company posted a net underwriting income of N16 billion at the end of the 2020 financial year. This is an increase of 16 percent over the preceding year’s figure.
The sharp drop in net claims expenses in the final quarter diluted the high growth recorded at the end of the third quarter. At N4.7 billion, net claims expenses increased by 20.5 percent at the full year, slowing down from 54 percent growth at the end of the third quarter.
On the other hand, a decline of 4.5 percent in underwriting expenses at the end of the third quarter reversed to an increase of 8 percent to almost N6 billion at the end of the year. This follows a strong growth of 108 percent in underwriting expenses quarter-on-quarter in the final quarter.
The significant moderation in net claims expenses strengthened underwriting profit at full year. It enabled the company to overwrite an underwriting loss in the third quarter and lift underwriting profit a clear 22 percent to N5.3 billion at full year.
The company recharged its cost-income balance in the final quarter by raising incomes and lowering costs. Underwriting income resumed growing ahead of total underwriting expenses after a break in the trend in the third quarter.
Total net underwriting income rose by 16 percent to N16 billion against an increase of 13.4 percent in underwriting expenses to N10.7 billion. This explains a rebound in underwriting profit from a drop at the end of the third quarter.
A further boost came from a 16 percent growth in investment income, which rose by over 16 percent to more than N1 billion at the end of the year. The big event however is the apparent windfall of N1.3 billion from net fair value gain realized in the final quarter. The value multiplied from N171 million in the prior fiscal year.
NEM Insurance closed the 2020 full-year operations with an after-tax profit of over N4 billion, a jump from N1.1 billion profit at the close of the third quarter. The figure is a big leap of close to 72 percent over the closing profit of N2.4 billion in 2019.
The company has sustained profit recovery and growth for the second year, having improved profit by 17 percent in the preceding year. It made a full recovery and attained a new profit peak in 2020 after a 27 percent drop in after-tax profit in 2018.
A dividend is expected to be announced when the audited report is issued. The company paid a cash dividend of 15 kobo per share for the 2019 operations.
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