Cornerstone Insurance Plc is seeing an upbeat this year with more than six and half times lifting of underwriting result year-on-year in the first quarter. The company is navigating a rebound this year from a 46 per cent fall in profit at the end of 2020.
A major increase in net claims expenses had caused a drop of 59 per cent in underwriting profit last year. The company mended the fences in the first quarter, which reduced the rate of increase in net claims expenses. That plus a doubling of net premium earned produced the elevated earnings results the company posted in the first quarter ended March 2021.
The underwriting firm showed a strong position on revenue performance in the first quarter. This is a turnaround from a drop in net premium income last year. Changes in life and annuity funds that caused the drop moved to the positive direction in the first quarter.
Some other developments however posed challenges to the company’s earnings story during the review period. These include a large reinsurance cost that claimed one-half of gross premium income.
Also, net underwriting expenses are on a path of rapid growth in the year and in the place of fair value gain last year, a huge loss was registered in the first quarter. On the income side, there was a drop of 66 per cent in net foreign exchange gain.
The cost increases diluted the strong growth in revenue over the period and narrowed down the margin of profit improvement. Overall, the company still registered a strong profit growth in the first quarter and has raised hopes for steering the path of a turnaround so far this year.
Cornerstone Insurance posted a gross premium income of N5.6 billion at the end of the first quarter of 2021, which is a major increase of 55.5 per cent year-on-year. Reinsurance expenses claimed 2.7 billion or 50 per cent of the figure.
The resulting net premium income of N2.8 billion still represents a near doubling of the corresponding figure last year. A strong boost came from fee and commission income that doubled to N674 million year-on-year.
Net underwriting income nearly doubled at 98 per cent to close at N3.5 billion for the first quarter. This is against a decline in net underwriting income at the end of 2020.
There was a drop in claims expenses by about 19 per cent to N1.3 billion in the first quarter but a huge drop in reinsurance recoveries changed the position to an increase of roughly 17 per cent in net claims expenses at the end of the quarter. The quarter closed with net claims expenses of N1.2 billion for Cornerstone Insurance.
Net underwriting expenses grew rapidly at 55 per cent year-on-year to N815 million at the end of the first quarter. At N2 billion, total underwriting expenses claimed a significantly reduced proportion of net underwriting income at 57 per cent compared to 87 per cent in the same period last year.
The resulting increased profit margin powered the high growth in underwriting result – which multiplied by 567 per cent to N1.5 billion at the end of the period. The high growth rate however thinned down towards the bottom line due to rising costs and disappointing earnings.
Earnings disappointments include a shift of position from a fair value gain of N166 million to a loss of N329 million over the review period. Also, net exchange gain dropped by 66 per cent to about N179 million over the same period. Further constraints came from increases in management expenses.
Cornerstone Insurance closed the first quarter with an after-tax profit of N658 million, which is an increase of 38.5 per cent year-on-year. The strong growth gives a good indication of a turnaround for the company after it lost close to one-half of its profit in the 2020 financial year.
The company earned less than 4 kobo per share in the first quarter, up from less than 3 kobo per share in the same period of last year. It closed last year’s operations with 15 kobo per share and paid no dividends to shareholders.
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