AXA Mansard Plc has capitulated to mounting obligations emblematic of an inflationary and volatile currency environment as profit slumped.
An unfavorable underwriting environment and low investment returns have hindered premium growth from trickling down to the bottom line (profit), which results in deteriorating margins and abysmally poor dividend distribution.
For the first nine months through September 2021, AXA Mansard’s net income reduced by 33.45 percent to N3.80 billion 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.
“Access to credit and health care remains out of reach for most Nigerians, so families in the diaspora end up serving as the bank and insurance company for their loved one’s back home,” said Maurice Iwunze, Chief Executive Officer of SympliFi.
“It’s a financial drain on those in the diaspora, while their loved ones back home continue to be excluded from the financial system. We wanted to develop an innovative solution to seamlessly address the problem, in a way that’s a win-win for both sides,” said Iwunze.