Coronation Insurance Plc’s net income surged 254.26 percent to N759.26 million for the fourth quarter of 2020, driven by share of profit in associate, cost reduction, higher favorable reserve development and investment income.
Contributing to the year on year improvement is higher investment income of N100.12 million even amid a low interest rate environment, as well as a 28.15 percent increase in sale of investment to N1.36 billion.
The results also benefited from cost control strategies implemented by management and board of directors to ward off inflationary pressures and high energy cost.
Operating expense ratio fell to 68.03 percent in December 2020 from 68.57 percent the previous year, according to MoneyCentral Calculations.
Management expenses were down 3.17 percent to N5.15 billion in the period under review as against N5.35 billion the previous year.
Net claims expenses were up 19.17 percent to N3.64 billion as at December 2020, driven primarily by movement in outstanding claims that surged by 11,970 percent.
Coronation Insurance’s ability to deliver strong results amid the Covid-19 crisis and difficult business environment is a manifestation of its talented workforce and efficient asset allocation strategies.
Return on equity (ROE) increased to 3.13 percent in the period under review from 1.16 percent as at December 2020, according to MoneyCentral Calculations.
There are indications that Coronation Insurance and its peers could be exposed to mounting obligations relating to business interruption brought on by the coronavirus pandemic that tipped the country into its second recession since 2016.
The prevailing conditions in the economy impacted sign-on of new business, renewal rate, installment payment of premium as net premium income dipped by 3.84 percent to N7.57 billion in December 2020 from N7.81 billion as at December 2019.
Analysts have warned that the deterioration in fixed income securities, low penetration, and the coronavirus pandemic are likely to undermine profitability in 2021.
Despite its huge population of 200 million people, the country has one of the lowest penetrations in Africa, while the industry is a step away from a recession.
The sector contracted by 18.67 percent year on year (y/y) in the third quarter (Q3 ) gross domestic product (GDP) report released by the National Bureau of Statistics (NBS).
The country’s insurance business as a percent of GDP stood at 0.5 percent compared with South Africa (12.9 percent), Kenya (2.8 percent), Angola (0.8 percent) and Egypt (0.6 percent) while density at $6.2 also remains weak compared to South Africa ($762.5), Kenya ($40.5), Angola ($30.5) and Egypt ($22.8).
With shareholders’ fund of N24.15 billion as at December 2020, Coronation Insurance is poised to meet the recapitalization deadline set by the regulator.
The National Insurance Commission had hiked the minimum capital for all classes of insurers with a view to making the industry more competitive in the global arena.
The minimum capital base for life insurance companies was increased from N2 billion to N8 billion while General Insurance was increased from N3billion to N10 billion.