AXA Mansard Insurance Plc suffered a profit drop of 40 per cent to close the 2022 financial with an after-tax profit of N2.2 billion. This is a more rapid drop in profit for the composite risk underwriting firm than the 18 per cent profit dive to N3.7 billion in 2021.
The company’s result is in line with our full-year outlook at the end of its third quarter operations. We had projected that the company’s “profit could fall to a three- to a four-year low in the year, as pressure from costs persists in the final quarter”.
The closing profit figure for the year is the lowest the company has earned any time since 2016. The earnings numbers are contained in the company’s unaudited full-year financial report made up to December 2022.
Overall, the company lost momentum in both operating arms of risk underwriting and investing businesses.
The profit drop partly follows a more rapid increase in underwriting expenses than net underwriting income during the year. Net underwriting expenses grew by N10.5 billion or 35 percent to close at over N40 billion for the year.
On the other hand, net underwriting income grew less rapidly by N9.6 billion or 24.6 percent to N48.6 billion at the end of the year.
Underwriting expenses, therefore, claimed more than all the increase in net underwriting income, which resulted in a drop of 9.3 percent in underwriting profit to N8.4 billion.
The main problem is that claims recovery from reinsurers failed to grow alongside gross claims expenses in the year. While gross claims expenses rose by roughly N9 billion to nearly N38 billion, claims recovered from reinsurers only edged up by N173 million to less than N4.8 billion.
This is despite that management grew reinsurance expenses ahead of gross premium income in the year. At over N23 billion, reinsurance expenses expanded by 25 percent in the year compared to a 24.6 per cent increase in gross premium income to N69.4 billion.
The drop in underwriting profit was reinforced by a marginal decline in total investment income to close at slightly over N6 billion.
The decline in total investment income was occasioned largely by a major swelling of net losses on financial instruments from N48 million in 2021 to about N732 million in 2022.
A drop of close to 76 per cent in other income to roughly N230 million also added to the downward pressure on total investment income.
An increase in operating costs against the declines in underwriting results and total investment income extended the pressure on the company’s bottom line.
Leading the operating cost increases are personnel expenses that grew by almost 21 percent to N4.5 billion. Marketing expenses also grew by 10.6 percent to about N1.7 billion in the year.
The cost increases slashed operating profit by almost 35 per cent to less than N4 billion at the end of the year.
The summary of the earnings story of the company for the 2022 financial year is that costs overtook revenue increases and profit numbers vied off target.
The year presented a wider volatility of earnings than the company has experienced in recent years. It is a sustaining loss of traction for the second year after lifting profit by 56 percent to N4.5 billion in 2020.
Earnings per share is down from 35 kobo in 2021 to 27 kobo at the end of the 2022 financial year.
The company paid an interim cash dividend of 6 kobo per share and shareholders can hope for more when the audited results are announced.
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