By Adedapo Adesanya
Leading insurance company, AIICO Insurance Plc, recorded a 12.2 per cent growth in its Gross Written Premium (GWP) to N19.7 billion in the first quarter of 2021 from N17.6 billion recorded in the corresponding quarter of 2020.
According to the company, the increase was due to a year-on-year rise of 34.0 per cent in the general insurance business (35.7 per cent of gross written premiums) to N7.0 billion as against N4.6 billion recorded in Q1 2020.
However, the profit after tax declined by 17.6 per cent year-on-year to N1.5 billion in the first quarter of 2021 from N1.9 billion in the first three months of last year.
It was observed that the profit before tax increased by 11.3 per cent year-on-year to N1.6 billion in Q1 2021 from N1.4 billion in Q1 2020 on the back of improved overall profitability in the insurance businesses (Life, General and HMO).
AIICO revealed that it recorded an underwriting profit of N27.7 billion in Q1 2021 compared to the N131.0 million loss posted in Q1, noting that it was attached to changes in sovereign bond yields, which impacted the value of the company’s liabilities and assets.
In the life business, the firm explained that it was typically concerned about whether there is a surplus or deficit of assets over liabilities because of these movements. However, because of limitations in financial reporting, changes in liabilities affect underwriting profits while changes in assets are reported below underwriting profits.
“The effect is the significant variation in underwriting profits especially in volatile investment yield environments, such as we have in Nigeria. During Q1 2021, annualized yields rose by 430 basis points to 11.7 per cent at the long end of the yield curve, leading to a reduction in the fair values of assets and liabilities; the reduction in liabilities led to positive underwriting profit while the reduction in assets is reflected in the fair value losses for the period,” it said.
According to the firm, the total investment income declined to a loss of N24.1 billion in Q1 2021 compared to N4.7 billion in the same period of last year. This came as the federal government’s bond yields rose, affecting the fair value of the company’s financial assets. FGN bonds make up most of AIICO’s investment portfolio.
It was revealed that profits in its wealth management business declined in Q1 2021 as capital markets turned bearish during the quarter.
Total assets declined by 11.1 per cent to N216.2 billion in Q1 2021 as against N243.1 billion in the preceding year driven by a reduction in financial assets (-9.3 per cent; 79.0 per cent of total assets) and cash and cash equivalents (-38.2 per cent; 9.1 per cent of total assets).
Total liabilities declined by 13.4 per cent to N180.6 billion in the review period as against N208.4 billion recorded in the full year 2020. This was driven mainly by a decline in insurance contract liabilities (-15.9 per cent) from the rise in yields and reserving for new business and fixed income liabilities (-9.5 per cent) in its asset management business.
Total equity increased by 2.8 per cent to N35.6 billion in Q1 2021 from N34.7 billion recorded in the whole of 2020.
Commenting on the results, the Managing Director and Chief Executive Officer (CEO), Mr Babatunde Fajemirokun, said, “The world is in a difficult moment and Nigeria has not been spared.
“Even as the world starts to move on from the pandemic, the economic after-effects will reverberate for a while yet. However, there is some reason for optimism – economic activities have improved, and the country will likely exit the recession. Oil prices remain elevated, and the pandemic-induced lockdowns are easing all over the world.
“We made significant strides in 2020: implementing our business continuity plan and leveraging technology to improve processes and get closer to our customers. Building on this, we recorded premium growth of 12.2 per cent year-on-year to N19.7 billion in Q1 2021. Our financial position remains resilient as well – shareholders’ funds increased 3.3 per cent year-to-date to N34.8 billion.
“Nonetheless, we remain optimistic that economic activities will continue to rebound in coming periods, the IMF has revised its economic growth forecasts for Nigeria upward to 2.5 per cent from 1.5 per cent.
“Insurance, like every other sector, will have its role to play in the economic recovery as enablers of economic growth by assuming risks that encourage long-term direct investment which enhances production and job creation. Our robust financial position ensures that we can meet our obligations when they arise.”
AIICO Insurance is a leading composite insurer in Nigeria with a record of serving our customers that dates back over 50 years. Founded in 1963, AIICO provides life and health insurance, general insurance and investment management services to create and protect wealth for individuals, families and corporate customers.