AIICO Insurance’s various lines of business are contributing to earnings, as the largest listed insurer by total assets recorded the fastest premium income expansion among peer rivals.
For instance, AIICO Insurance’s gross premium income increased by 37.48 percent to N43.80 billion as at December 2019, that compares with Custodian Investment, (+36.24 percent); AXA Mansard, (+31.12 percent); Prestige Assurance, (+26.96 percent); Wapic Insurance, (+14.50 percent); NEM Insurance, (+12.61 percent), and Lasaco, (+28.67 percent), and Zenith Assurance, (+6.37 percent).
Others are: Consolidated Hallmark, (+18.82 percent); Law Union and Rock, (+8.05 percent).
The company has deployed the resources of shareholders in generating higher profit as annualized return on average equity (ROAE) increased to 27.13 percent in December 2019 from 24.24 percent the previous the year.
Shareholder funds spiked by 83.84 percent as at December 2020, a signal that the composite insurer has been recording consistent profit since its existence, as investment income continues to buoy profitability.
AIICO Insurance generated a higher return on sales, which means it has turned each Naira invested in premium into higher earnings as net profit margin increased to 13.39 percent in December 2019 as against 9.82 percent the previous.
The company attributes the stellar performance and its ability to deliver a high returns to shareholders to growth across all lines of businesses within the group even amid a challenging business environment.
“Over the course of 2019, we undertook a thorough review of our business with a clear aspiration to attain marker leadership through profit growth,” said Babatunde Fajemirokun, managing director/CEO of the company.
“Stemming from the progress made so far, it is my belief and have the right strategy in place even more sterling performance in the years ahead,” said Fajemirokun.
However, the insurer recorded underwriting loss of N6.34 billion as at December 2019, but an investment income of N10.53 billion helped wipeout the loss and the it recorded a 86.69 percent increase in net income to N5.86 billion as at December 2019.
The underwriting loss was due to an 844.13 percent surge in change in life and annuity fund to N18.18 billion as at December 2019.
Analysts have warned that annuities could become a burden and erode profitability as they unanimously agreed that a low yield environment and the fallout from the coronavirus pandemic would further weaken investment returns.
Insurers in Africa’s largest economy invested their funds in short term government securities when yields were high, making money that added impetus to weak underwriting results.
But the decision by central bank to ban individuals and corporates from Open Market Operations (OMO) late last year sent yields crashing to an all time low, a double whammy for insurers that had been enjoying such free money.
AIICO is honoring obligation to policy holders as it mitigates loss ratio, which means it is spending less on claims to generate each unit of revenue.
Claims ratio fell to 57.82 percent in December 2019 from 74.90 percent as December 2018. Claims expenses were up 25.33 percent to N25.33 billion in the period under review.
At the Zenith of the coronavirus pandemic that paralyzed business activities across the country, AIICO paid N1.70 billion in fulfillment to its contractual claims.
The company said 75 percent of the amount was for benefits and claims payment of its life business with the remaining 25 percent incurred in the non-life business.
AIICO Insurance incurred N11.87 billion in operating and management expenses, which represent a 29.13 percent uptick from N9.19 billion as at December 2018.
In order to meet the new capital requirement by set by regulator, the isurer increased its paid-up share capital to N11.3 billion from the previous figure of N6.1 billion following investments from LeapFrog Nigeria Insurance Holdings Limited as well as Aiico Bahamas Nigeria Limited.
While LeapFrog Nigeria acquired a 28.24 percent stake in the company, AIICO Bahamas Nigeria Limited acquired a 10.59 percent stake.