Consolidated Hallmark Insurance Plc has broken free from the rise and fall pattern of profit records and is building profit for the third year in 2021. The risk underwriting firm closed the first quarter in March with group after tax profit of over N291 million, which is an outstanding growth of 39 percent year-on-year.
This is a major acceleration from the increase of 8.6 per cent in pre-tax profit to N772 million in 2020. The company is the third year of steering earnings growth after attaining full recovery from past profit drops in 2019.
There is a favourable balance in the cost-income numbers for the company in four areas that is keeping profit elevated this year. First, revenue has been maintained on the upbeat since 2018 and the momentum is being sustained in the current financial year.
The income side is also boosted by a phenomenal growth in claims recoveries from reinsurers, which moderated the growth in net claims expenses considerably. Another cost moderation came from underwriting expenses, which grew only moderately at 4.7 percent.
The fourth pillar of the company’s profit building quadrangle is cost saving from management expenses, which ended only marginally higher in the first quarter. These favourable developments resulted in a strong build-up of underwriting profit and supported by even stronger growth in investment income.
Consolidated Hallmark Insurance closed the first quarter operations in March 2021 with gross premium of N3.2 billion. This represents an increase of 12 percent year-on-year – which is at par with the growth rate achieved in the preceding financial year.
Net premium income grew at double that rate at 24 per cent to N2.2 billion. This reflects a decline in reinsurance expenses, which went down marginally over the same period to N975 million.
A weak point on the earnings side was recorded in respect of fee and commission income, which tumbled from about N84 million in the first quarter of last year to a loss of over N1 million in the first quarter.
Net underwriting income grew by 18.5 per cent to N2.2 billion at the end of the first quarter. This represents a solid growth in revenue for the company in the light of the generally subdued economic activities during the period.
Claims expenses recorded a high jump of 76 percent to N915 million during the quarter but a major boost in claims recoveries from reinsurers diluted the increase. At N217 million, claims recoveries from reinsurers soared from less than N15 million in the same period last year.
The recoveries lowered net claims expenses to N698 million, which is still a high growth of over 38 percent year-on-year. A further moderation came from underwriting expenses, which made only a moderate increase of 4.7 per cent to N636 million.
Total underwriting expenses therefore grew by less than 20 percent to N1.3 billion over the review period.\Total underwriting expenses grew slightly ahead of net underwriting income but that still permitted a strong growth of 16.4 per cent in underwriting profit to N918 million at the end of the first quarter.
At about N285 million at the end of the first quarter, investment income grew by 27 percent over the review period. This reinforced the increase in underwriting profit in the first quarter.
Also, management expenses were virtually flat at an increase of 2 percent to N709 million at the end of March 2021. The result of the cost-income balance at the end of the period was favourable. Costs moderated generally while earnings improved, leading to the strong growth in after tax profit in the first quarter.
The company appears to be moving in line with the assurance of its group chief executive officer, Eddie Efekoha that it is prepared for the challenges of the future.
The company earned 3 kobo per share at the end of the first quarter, up from 2 kobo per share in the same period in the preceding year.
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