AIICO Insurance Plc net income has risen on the back of earnings from sale of its subsidiary that helped compensate for a huge fair value loss on financial assets.
F0r the first six month through June 2021, AIICO Insurance net income increased by 13.68 percent to N3.25 billion in June 2021 from N2.86 billion the previous year.
The bottom line (profit) was juiced up by the proceeds from disposal of discontinued operations to a tune of N2.37 billion, but such items are one 0ff and do not recur often because they fall outside the core activities of entities.
AIICO Insurance had sold its majority stake in its pension business to First City Monument Bank (FCMB), in a deal that took market participants by surprise.
The insurer incurred N33.13 billion in loss on fair value on financial assets, and that was responsible for 58.23 percent reduction in pretax profit.
A financial asset is a liquid asset that represents—and derives value from—a claim of ownership of an entity or contractual rights to future payments from an entity.
AIICO Insurance posted underwriting profit of N31.96 billion as at June 2021, from a loss of N10.85 billion the previous year.
The company had been struggling with huge losses emanating from the actuarial valuation of life insurance and annuity funds to the tune of
However, it recorded negative real underwriting results of N6.79 billion from N3.60 billion, according to MoneyCentral calculations.
While the underwriting profit is the difference between net premium income and claims/underwriting expenses, the real underwriting results are derived by deducting 1 from combined ratio (claims expenses, underwriting expenses, and management expenses).
Of course, like other companies, AIICO Insurance is grappling with mounting obligations to policyholders, as it capitulated to the unfavorable underwriting environment.
For instance, claims ratio increased to 71.77 percent in the period under review from 56.05 percent the previous year. Total expenses were up 44.85 percent to N20.93 percent in June 2021 from N14.45 billion the previous year.
It is not surprising that the combined ratio increased to 100.23 percent in June 2021 from 86.38 percent as of June 2020, according to data gathered by MoneyCentral.
AIICO Insurance recorded stellar performance at the topline (revenue), thanks to contribution from the Life and Non-Life segment as its innovative products are making an inroad into the Nigerian market.
Gross premium written (GPW) rose by 17.41 percent to N37.48 billion in the period under review from N31.92 billion the previous year.
Drilling down the financial statements of the insurer shows gross premium written from the Life segment was up 8.63 percent to N37.48 billion.
Net premium income was up 13.15 percent to N29.17 billion in the period under review from N25.87 billion the previous year.