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Friday, March 24, 2023

Royal Exchange Returns to Profitability in Q3 as expenses shrink

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Royal Exchange Nigeria Plc has posted a net income of N565.66 million for the third quarter (Q3) of 2020, compared with a net loss of N96.20 million for the same period last year.

The strong quarterly result was buoy by reduction in claims/management expenses, and an increase in investment income, but the combined ratio is above the 100 percent threshold.

Net premium income was down 9.84 percent to N6.23 billion as at September 2020 from N6.91 billion the previous year, no thanks to an uptick in unearned premium and reinsurance expenses.

Underwriting profit fell by 2.21 percent to N1.28 billion in the period under review as against N1.31 billion as at September 2019.

The company, with interest in general insurance, life insurance, finance, healthcare and microfinance banking, said it will use the resources at its disposal to deliver higher returns to shareholders even amid a tough and unpredictable macroeconomic environment.

Royal Exchange saw total net claims expenses dip by 34.18 percent to N1.84 billion in the period under review from N2.75 billion the previous year.

Loss ratio fell to 37.97 percent in the period under review from 39.97 percent as at September 2019; this means the insurer has spent less on claims expenses to generate premium income.

Total Management expenses were down 28.70 percent to N1.49 billion as at September 2020 from N2.09 billion as at September 2019.

The insurer realized N761.39 billion as at September 2020, which represents 32.92 percent increase from 2019’s N572.78 billion, but there are indications that the declining fixed income securities could undermine future investment income.

A reduction in investment returns on the back of Covid-19 headwinds and low yield environment could pressure profit margin, a double whammy for insurers who are struggling to poor valuations as investors’ apathy towards the industry bites.

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