High hopes raised by NEM Insurance Plc with its N2.9 billion profit in the first quarter faded in the second quarter when profit fell by 34.7 percent to N645 million.
The company’s management isn’t expecting the high growth momentum seen in the first quarter to return for the rest of the year.
With a half-year profit of N3.5 billion, it projects to generate N2.2 billion in all of the second half to close the year with a bottom line of less than N5.7 billion – just 5 percent up on the closing profit of N5.4 billion in 2022.
The half-year interim financial report of the general business underwriter for the period ended June 2023 shows that it lost the exceptional speed on the earnings track gained in the first quarter with which it could have beaten last year’s closing profit by half a year.
The company is a watch candidate this year to see if it could sustain its recovery in 2022 from a profit drop from N5 billion in 2020 to N4.4 billion in 2021. Its impressive start with a 84.6 percent profit leap in the first quarter has eased to an increase of 38 percent in the half year.
The loss of momentum in the second quarter came from a large increase in reinsurance and underwriting expenses in the face of outstanding growth in gross premium earned.
While gross premium earned rose by 113.6 percent to N13.8 billion for the second quarter – an increase of more than N7 billion, no part of the increase reached the bottom line.
Reinsurance expenses reversed its major drop in the first quarter and rose by 111 percent to N7 billion in the second quarter.
Underwriting expenses multiplied more than three and half times to N6.9 billion in the second quarter, which consumed about 84 percent of net underwriting income for the quarter.
Underwriting income therefore dropped by 24 percent to N746 million in the second quarter, down from over 55 percent advance in underwriting profit to N4.2 billion in the first quarter.
An increase of 58.5 percent in investment income to N929 million was diluted by a leap of 83.7 percent in other operating expenses, cutting profit for the quarter down from N989 million in the same quarter last year to less than N646 million in the second quarter.
The company’s half-year position is a combination of the outstanding profit growth of the first quarter and the weakness of the second quarter.
Revenue performance however remained strong through the quarter with gross premium earned amounting to N26.6 billion at half year – an increase of 44.8 percent year-on-year.
Net premium income amounted to N18.5 billion, increasing from N12.3 billion in the same period last year. Fee and commission income of N1.6 billion helped to raise net underwriting income by 48.4 percent to N20 billion at the half year.
Claims expenses dropped by 18.3 percent year-on-year to N3.5 billion but the drop was more than countered by a major increase of 110 percent in underwriting costs – which amounted to N11.6 billion at the end of half-year trading.
Underwriting profit still grew by 34.4 percent to N4.9 billion – a weak improvement however from N4.2 billion generated in the first quarter.
The company maintained strong growth in investment income, which rose by over 59 percent year-on-year to close at N1.2 billion. As much as N929 million of the figure was earned in the second quarter.
At N3.9 billion at the end of June, pre-tax profit grew from N2.9 billion in the same period last year and after-tax profit went up by 32 percent to N3.5 billion over the same period.
NEM Insurance closed the half-year operations with earnings per share of about 35 kobo, up from 25 kobo per share for the same period in 2022.
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