Insurers quoted on the NGX have posted record profit underpinned by foreign exchange revaluation, revenue growth, and income from investment securities, rekindling investors’ hope of bumper dividend.
These firms saw their combined profit after tax (PAT) surge by 738.79 billion to N46.59 billion as at March 2024 from N5.55 billion as at March 2023, according to data gathered by MoneyCentral.
The improvement at the bottom line (profit) was buoyed by foreign exchange revaluation gains by firms that have dollar denominated assets in their books as the financial institutions were the beneficiary of the abrupt devaluation of the currency.
It is noteworthy that these firms realised N25.15 billion in foreign exchange gains, but there are concerns that such gains may fade when the Naira starts to appreciate against the U.S dollar as there are expectations the government’s bold reforms will stabilise the economy.
Custodian Investment realised N10.70 billion in FX gains; AIICO Insurance Plc, N7.73 billion, and AXA Mansard Plc, and N12.59 billion.
The naira has depreciated against the US dollar by 69.47 percent under the current administration led by President Bola Ahmed Tinubu amid the implementation of foreign exchange reforms.
Income from investment bonds and treasuries also added strength to earnings, thanks to the aggressive monetary policy of the central bank who is hiking rates to rein in inflation that is waging war on Nigerians.
The Monetary Policy Committee of the central bank has increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.
Nigeria’s headline inflation rate has increased to 33.69 per cent in April 2024 up from 33.20 per cent recorded in March 2024, the National Bureau of Statistics has said.
The largest and the most liquid insurers in Nigeria collectively earned N25.08 billion in investment income, according to data gathered by MoneyCentral.
These exceptional items shield companies from the negative impact of higher combined ratio as claims and operating/underwriting expenses are mounting on the back of rising inflation.
Analysts are of the view that the reopening of the economy in 2021 and the relaxation of lockdown policy after the COVI-19 crisis had abated combined with the launch of new products also contributed to the uptick in profit.
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