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Chuks Udo Okonta
AIICO Insurance Plc (“AIICO”, or “the Group”) has announced that its Gross written Premium (GWP) grew by 12.2 per cent y-o-y to ₦19.7 billion in first quarter 2021 (Q1 2020: ₦17.6 billion).
A statement by the firm’s Head, Strategic Marketing & Communications Department, Segun Olalandu, noted that the performance was due to a y-o-y increase of 34.0 per cent in the General Insurance business (35.7 per cent of gross written premiums) to ₦7.0 billion (Q1 2020: ₦4.6 billion).
He noted that the underwriting profit of ₦27.7 billion in Q1 2021 (Q1 2020: ₦-131.0 million) was attached and that changes in sovereign bond yields impacted the value of our liabilities and assets. These movements, he said are reflected in the change in life and annuity funds as well as fair value/realized gains or losses on the income statement.
In the Life business, he said the firm is 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, he added.
“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% 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,” he posited.
According to him, the total investment income declined to a loss of ₦24.1 billion in Q1 2021 (Q1 2020: ₦4.7 billion) as Federal Government of Nigeria bond yields rose, affecting the fair value of our financial assets. Federal Government of Nigeria bonds make up most of our investment portfolio.
Profit before tax increased by 11.3 per cent y-o-y to ₦1.6 billion in Q1 2021 (Q1 2020: ₦1.4 billion) on the back of improved overall profitability in the insurance businesses (Life, General and HMO). Profits in our Wealth Management business declined in Q1 2021 as capital markets turned bearish during the quarter, he stressed.
He submitted that profit after tax declined by 17.6 per cent y-o-y to ₦1.5 billion in Q1 2021 (Q1 2020: ₦1.9 billion) – tax credits of ₦435.7 million in Q1 2020 improved after tax performance compared to Q1 2021.
Total assets declined by 11.1 per centto ₦216.2 billion in Q1 2021 (FY 2020: ₦243.1 billion) driven by a reduction in financial assets (-9.3%; 79.0% of total assets) and cash and cash equivalents (-38.2%%; 9.1% of total assets), he said.
He noted that total liabilities declined by 13.4 per cent to ₦180.6 billion in Q1 2021 (FY 2020: ₦208.4 billion). This was driven mainly by decline in insurance contract liabilities (-15.9%) from the rise in yields and reserving for new business and fixed income liabilities (-9.5%) in our asset management business.
Total equity, he said increased by 2.8 per cent to ₦35.6 billion in Q1 2021 (FY 2020: ₦34.7 billion).
Commenting on the results, the Managing Director and Chief Executive Officer (CEO) 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% y-o-y to ₦19.7 billion in Q1 2021. Our financial position remains resilient as well – shareholders’ funds increased 3.3% year-to-date to ₦34.8 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.