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Thursday, August 11, 2022

AXA Mansard Share Reconstruction Triggers Investors Apathy Towards Stock

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AXA Mansard Plc share reconstruction triggered investor apathy towards the stock leaving it with the lowest performance in the past three years, a double whammy for a company struggling to deliver higher returns to shareholders.

The company was among the top five losers for 2021 had its shares shed (-44.80 percent), according to data Chapel Hill Denham Limited.

Many market participants had expected that the capital reconstruction would bolster their confidence in the insurer’s earnings and growth potentials.

On October 4, 2021, AXA Mansard recorded the highest loss of 29.82 per cent the penultimate week.

The share reconstruction saw the reduction of the company’s issued shares from 36 billion ordinary shares of 50 kobo each to 9.0 billion ordinary shares of N2 each, implying technically the cancellation of 27 billion ordinary shares of 50 kobo each.

AXA Mansard has succumbed to inflationary pressures and currency volatility as net income dipped by 33.45 percent to N3.80 billion in September 2021 from N5.67 billion the previous year.

The insurer spends more claims expenses than it generates in revenue, and improvement in business activities on the back of the relaxation of lockdown police stoked mounting obligation from policyholders who are now driving their cars.

Claims ratio increased to 65.05 percent in September 2021 from 58.84 percent as at September 2020, according to MoneyCentral calculations.

It is not surprising that the combined ratio moved to 100.16 percent as of September 2021 from 95.93 percent the previous year.

The combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations.

A ratio below 100 percent indicates that the company is making an underwriting profit, while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.

While AXA Mansard saw underwriting profit increase by 19.82 percent to N8.39 billion in the period under review, its recorded negative real underwriting results of N1.64 billion.

The real underwriting results differ from underwriting profit because it includes management expenses in its calculation.

Interestingly, a low yield environment has undermined investment income and a lot of insurers will be impacted negatively investment returns help compensate for deteriorating underwriting profit.

AXA Mansard is intensifying its marketing and distribution strategies that are strengthening revenue.

Gross premium income was up 18.04 percent to N40.47 billion in the period under review from N34.18 billion as at September 2020.

It is noteworthy to note that the insurer is not spending more on operating expenses to generate premium income.Total expense ratio moved to 35.35 percent in September 2021 from 37.09 percent the previous year.

The insurer has partnered a United Kingdom based fintech firm SympliFi to boost insurance penetration and deepen insurance penetration.

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