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Thursday, September 28, 2023

Cornerstone Insurance Profit Surges 3,555% on N12.75bn Fair Value Gain

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Cornerstone Insurance Plc has benefitted from net exchange gain due to translation of foreign currency denominated assets that spurred a strong profit growth even amid rising claims and deteriorating underwriting results.

For the first six months through June 2023, Cornerstone Insurance’s net income surged by 3,556 percent to N11.25 billion from N408.12 million As at June 2022, the highest uptick at the bottom line (profit) in over a decade.

The surge was driven by a foreign exchange gains of N12.77 billion in the period under review as a weak Naira was a boon for the insurer as there were increases in foreign currency denominated assets

However, there were weaknesses at the underwriting level due to mounting obligations to policyholders. A stubbornly high inflation means the replacement cost of assets from vehicles to buildings has been spiking.

For instance, claims expenses surged by 166.25 percent to N4.26 billion in June 2023 from N1.60 billion the previous year.

That resulted in an underwriting loss of N1.22 billion from a profit position of N2.37 billion as of June 2023.

The insurer’s combined ratio deteriorated to 164.32 percent in June 2023 from 123.95 percent in June 2022, according to MoneyCentral calculations.

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

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.

The insurer’s physical and digital channels have been expanding and contributing to top line (sales) growth as all business segments are also contributing to earnings growth.

Gross premium written (GPW) spiked by 42.91 percent to N14.72 billion in June 2023 from N10.30 billion as at June 2022.

Gross premium income (GPI) was up 24.94 percent to N13.32 billion as at June 2023 from N10.66 billion the previous year.

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