Cornerstone Insurance Plc finished the 2023 operations with one of the poorest underwriting results since 2018 but huge net foreign exchange gains of N17.7 billion provided an impressive dressing of the bottom line to achieve the most outstanding earnings reading in its operating history.
The management report of the composite risk underwriter for the full year ended December 2023 shows that after-tax profit burst the target for the year and closed at N15.7 billion.
The profit figure is more than six times the company’s full year profit of N2.5 billion in 2022 and more than its N12 billion profits for the preceding five years put together.
The profit for the year is well in excess of the company’s profit forecast of N12.6 billion for the full year and the final quarter gets credit for the boost.
A forecast net profit of N1.7 billion for the final quarter turned out to multiply close to three times that number.
The closing quarter delivered a net profit of N4.8 billion, as the foreign exchange windfall swelled further from less than N12 billion at the end of the third quarter to N17.7 billion at the end of the year.
The big inflow enabled the company to prevent poor underwriting results that marked its operating story in 2023 from extending to the bottom line.
Underwriting profit went down by 47.5 per cent to N2.3 billion at the end of the year with the final quarter accounting for N1.6 billion of the figure.
The company’s underwriting business gained momentum in the final quarter with key operating numbers closing within target or better.
The upturn led to over two and half times jump in underwriting profit from N639 million to N1.6 billion during the quarter.
The observed weakness of the company in converting gross premium written into earnings received some strength in the final quarter with strong increases in net premium and underwriting incomes and a drop in net claim expenses.
The company’s full year numbers show that gross premium income grew by N5.8 billion to N27.5 billion while a slowdown in attaching costs in the final quarter enabled it to convert N1.4 billion of the increase into net premium earned.
There were large negative changes in unearned premium income, life and annuity life funds while reinsurance expenses remained huge at N13.5 billion.
Net premium income recovered from 5 per cent drop to N7 billion at the end of the third quarter and grew by 15.6 per cent to over N10 billion at full year.
Fee and commission income of N2.6 billion helped to build net underwriting income of N12.9 billion, up from N11.5 billion in 2022.
Pressure came from a negative change of N1.3 billion in outstanding claims compared to a positive figure of N864 million in the preceding year.
Part of the pressure was stemmed by a strong growth of 76.7 per cent in claims recovery, which amounted to N2 billion but net claims expenses still rose by 69.4 per cent to N5.7 billion – almost six times an increase of 11.7 per cent in underwriting income.
Net underwriting expenses also encroached on net underwriting income at an increase of 29 per cent to N4.8 billion.
The cost increases pressured underwriting profit to drop from N4.4 billion in the preceding year to N2.3 billion at the end of the 2023 operations.
The company’s poor underwriting result is more than compensated by the investment arm of the business.
Investment income grew by 63.4 per cent to N3.8 billion and net trading income jumped by 136 per cent to about N678 million in the year.
But the big news for the year that changed the company’s earnings story is the windfall of N17.7 billion net foreign exchange gains – which advanced all the way from net gains of N769 million in 2022.
The big unexpected gains shielded the company from major operating pressure in the underwriting business and changed its fortunes from the drop in underwriting profit to a high jump of over six times in the bottom line.
Cornerstone Insurance earned 86 kobo per share at the end of the year, rising from 14 kobo per share at the end of 2022.
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