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AXA Mansard’s net income surges 154.25 percent amid challenging environment

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Despite the challenging operating environment, AXA Mansard Insurance Plc is thriving, as the Nigerian insurer recorded a double digit growth in earnings, which makes it easy to reward shareholders in form of bumper dividend.

The impressive performance can be attributed to excellent underwriting capabilities, cost optimization and efficiencies in a country beset by epileptic power supply.

For the first six months through June 2020, AXA Mansard’s net income surged by 154.25 percent to N3.60 billion from N1.41 billion the previous year.

Revenue grew faster than claims and underwriting expenses as combined ratio improved to 100.28 percent from 115.38 percent the previous year.

As a result, the insurer posts N4.59 billion in underwriting profit, which represents 88.38 percent uptick from 2019’s N2.49 billion as at June 2019,.

The largest insurer by market capitalization in Africa’s largest economy focuses on identifying new growth in its markets, strengthening its partnership and redefining distribution strategy with a view to magnifying its market share.

The aforementioned strategy has paid off as gross premium income spiked by 15.15 percent to N22.73 billion in the period under review as against N19.73 billion the previous year.

AXA Mansard Health Maintenance Organization (HMO), a business segment of Group Company, recorded a 35.05 percent increase in gross premium to N12.06 billion.

Analysts have warned that the downside risk to AXA Mansard’s future earnings is the low yield environment, and that only strong growth in premium income and cost control measures can guarantee continued uptick in profit.

Insurers pack their money in save haven assets like short term government securities when yields are high, earnings sizable investment income that helps add impetus to profitability.

For instance, AXA Mansard realized N2.75 billion in investment income as at June 2020, a mere 3.77 percent increase from 2019’s N2.65 billion.

The Central Bank of Nigeria (CBN) excluded non-bank locals (individuals and corporates) from participation in its Open Market Operations (OMO) at both the primary and secondary market.

That sent treasury yields crashing from a high of 22 percent to 2.14 percent at the moment, but there has been a rush by Pension Fund Administrators for equity.

Investors and analysts say the coronvirus pandemic that slowed economic activities and reduced volume of transactions could cast a pall on future premium growth.

AXA Mansard’s claims expenses were up 15.17 percent to N9.83 billion as at June 2020, a testament of the company’s capability to pay all valid claims promptly.

Pricewaterhouse coopers (PWC) in a recent report said the falleout from COVID-19 outbreak includes a surge in health, travel and business interruption claims, pressure on sales from reduced business activity, and less use of face-to-face channels.

“This raises the possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts,’’ said the report.

AXA Mansard has shareholders’ fund was up 18.24 percent to N29.86 billion as June 2020, a figure that could be enough to scale the recapitalization bench mark set by the National Insurance Commission (NAICOM).

 

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