Royal Exchange Plc has returned to the path of profitability, thanks to savings and efficiencies across insurance businesses that are expected to help drive returns for its shareholders.
As well as wielding its diversified products base to underpin revenue, the insurer expects cost-cutting and expense savings to help deliver higher returns even amid a low yield environment and economic downturn.
Royal Exchange posted profit after of N420.07 million as at June 2020, from a loss of N631.46 million the previous year.
The impressive performance was largely driven by an improvement in underwriting conditions as there were reductions in underwriting and claims expenses, which led to reduction in combined ratio to 97.90 percent in June 2020 from 1.29 percent the previous year.
Analysts that spoke with MoneyCentral said Royal Exchange has successfully reduced complexities in its internal processes and resolutely driving digital transformation.
Total claims expenses were down to 52.60 percent to N1.03 billion as at June 2020 from N2.17 billion as at June 2019.
The insurer is earning more in premium than it is paying out in claims as loss ratio fell to 25.05 percent in the period under review as against 50.24 percent the previous year.
The reduction in claims expenses can be attributed to insurance claims and benefits incurred – recoverable from reinsurers.
Total management expenses were down 29.94 percent to N971.48 million as at June 2020 as against N1.38 billion as at June 2019. Operating expense ratio fell to 23.57 billion in the period under review as against 32 percent the previous year.
Royal Exchange said it was able to grow its figures by participating in large-ticket financial transactions, as well as playing in the retail insurance market, which he said would be a key growth driver in the years ahead.
The company said it envisions a situation where the retail insurance market should be able to contribute between 50-60 per cent of our revenues in the future, as the retail market is the future of insurance in Nigeria, considering the population of the country.”
Royal Exchange stock is listed on the Nigerian Stock Exchange (NSE) and closed trading at N0.24 per share. The stock is up 9 percent in the past year.