Profit figures vied widely off target from the first quarter and the third quarter ended with after-tax profit down by 55 percent to N1.7 billion. This is even well below management’s forecast profit of N2.5 billion at the half year.
The company’s profit dived by 22 percent to N3.5 billion at the end of 2021 and a worse performance looks quite likely for Axa Mansard Insurance in 2022. Reasonable estimates indicate that profit could fall to a three to four-year low in the year, as pressure from costs persists in the final quarter.
The company’s interim earnings report for the third quarter operations ended September 2022 shows that net premium income grew strongly at 27.8 percent to N34.7 billion year-on-year but expenses burst the ceilings, consumed the earnings, and smashed margins during the period.
Net underwriting income grew by N8 billion or over 28 per cent year-on-year to N36.6 billion but underwriting expenses claimed more than all the increase. Total underwriting cost rose by over N10 billion or more than 50 per cent to an excess of N30 billion during the period.
The main weakness came from claims expenses recovery from reinsurers, which fell by 75 per cent to less than N992 million at the end of September 2022. This is against an increase of 16.7 per cent or N3.6 billion in gross claims expenses to over N25 billion over the same period.
Further pressure came from a negative change of almost N2 billion in individual life reserves compared to a positive figure of over N80 million in the same period in 2021.
With higher-than-expected net claims and underwriting expenses, the company closed the third quarter operations with total underwriting expenses consuming significantly more than all the increase in net underwriting income.
The incursion eroded underwriting profit, which dropped by 24.5 per cent year-on-year to N6.3 billion at the end of September 2022.
An upturn was recorded in respect of total investment income, which grew by 28.8 per cent to close at over N4 billion for the nine months to September 2022. This is an upturn from a drop of 13.5 per cent in investment income to N6 billion at the end of 2021.
The growth in investment income was powered mainly by a drop of over 58 per cent in net losses on financial instruments to N372 million.
Additional weight on the side of the cost came from an increase of almost 40 per cent in personnel expenses to over N3 billion as well as inflation-driven other operating expenses that grew by 15 per cent to over N3 billion as well.
The cost increases slashed operating profit by 44 per cent to N3 billion at the end of the third quarter.
Reasonable growth in revenues with overstretching costs marked the earnings story of the composite risk underwriting firm over the three quarters of the 2022 financial year. Actual numbers are way off forecast, as rising net claims and operating expenses dragged down the bottom line through the period.
The cost-income balance continued tilting to the side of cost, setting profit accelerating downward through the year.
The hopes for a turnaround held by forecast numbers have faded and Axa Mansard Insurance can be expected to report another bad earnings season in 2022.
The 2021 financial year marked a loss of traction in the rapid profit growth records the company achieved in the preceding two years. It had lifted profit by 56 per cent to N4.5 billion in the 2020 financial year.
Subject to an unexpected upswing in the final quarter, worse earnings records look quite likely for the company in 2022 than seen in the preceding year. The company has experienced a wider volatility of earnings in the just concluded financial year than experienced in recent years.
Earnings per share are down from 40 kobo to 17 kobo over the review period but shareholders collected an interim cash dividend of 6 kobo per share last December.
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