AIICO Insurance Plc overturned its N36 billion underwriting loss in 2020 into an underwriting profit of N29.5 billion in 2021. That gain was however more than countered by an adverse shift from net fair value gains of N30.6 billion in 2020 to net losses of N34.7 billion in 2021.
The changes, which are contained in the composite insurance company’s unaudited report for the year, resulted in a 64 per cent slash in profit from continuing operations to N1.8 billion at the end of the 2021 operations.
Loss in the value of financial assets posed a big challenge to the company’s management through the financial year. As much as N32 billion of the loss figure occurred in the first quarter and a further increase led to an overall loss position for the second quarter and a profit drop at the half-year.
With the huge loss in asset values, the company suffered a drop of close to 9 per cent in its financial asset portfolio to close the year at N172 billion. That contributed to shrinking the size of the balance sheet by 8.7 per cent to N122 billion.
The driving force for the upturn in underwriting profit was mustered from three major angles. The first is a change in life fund from the negative figure of almost N30 billion in the preceding financial year to a positive number at N8.5 billion in 2021.
The second is a similar change in annuity fund from the negative figure of roughly N17 billion to a positive figure of over N11 billion over the same period. A drop of 97 per cent in negative figures of change in other investment contracts to N1 billion provided the third support for a sharp drop in underwriting expenses.
Gross claims expenses remained huge at N47 billion for the year, an increase from N39.7 billion in the prior fiscal year. Recoveries from reinsurers went down from N8 billion to N7 billion over the same period. That resulted in an increase of 26 per cent in net claims expenses to almost N40 billion at the end of the year.
The challenge of claims expenses growing well ahead of net underwriting income has continued to face the company’s management. Net claims expenses grew more than twice as fast as net underwriting revenue during the year.
The drop in underwriting expenses countered the growth in net claims expenses and total underwriting cost therefore falling by close to two-thirds from N91 billion to N31.7 billion at the end of the review period.
The drop in total underwriting expenses happened against an improvement in underwriting revenue, which produced a good combination for the company in the year.
AIICO Insurance generated a net premium income of N58.6 billion in the full year, representing an increase of 11 per cent. This was further enhanced by an increase of 47 per cent in fee and commission income on insurance contracts to over N2 billion.
Net underwriting income grew by under 12 per cent to N61 billion against the huge drop in total underwriting cost. This was the upside of the company’s earnings numbers that produced the underwriting profit of N29.5 billion in the year.
The downside followed in the investment arm of the company’s operations with net fair value loss that more than consumed the underwriting profit. Besides that, other revenue disappointments from investments followed. These include a drop in net realised gains by two-thirds to N2.4 billion and also a drop of 28 per cent in other operating income to N1.7 billion.
Despite a firm control of operating costs, the company lost significant profit capacity in its 2021 operations. After-tax profit fell by over 64 per cent to below N1.8 billion at the end of the year.
A windfall of N2.4 billion from discontinued operations came quite handy to jerk up profit for the year to N4 billion. The company affected partial disposal of its investment in AIICO Pension Managers Limited during the year.
The company still suffered a drop of 21 per cent in its closing profit for the year from over N5 billion earned in 2020. Earnings per share went down from 44 kobo to 26 kobo over the review period.
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