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Interest income from short term government securities has lifted AXA Mansard Insurance Plc’s full year profit as the insurer continues to intensify its investment strategy with a view of increasing share of the market.
For the year ended December 2017, the Nigerian net income increased by 1.57 percent to N2.67 billion as against N2.63 billion as at December 2016.
The slight growth at the bottom line (profit) was driven by a N2.01 billion interest income from short term government securities that make up 39.33 percent of investment income.
In short, investment income increased by 37.86 percent in the period under review, which make up for a drop in underwriting profit as the insurer continues to grapple with rising claims and underwriting expenses.
Deposit Money Banks (DMO) and some insurance firms in Africa’s most populous nation made money from fixed income on short term government securities when yields were attractive in 2017.
High yields on Net Treasury Bills (NTBs) issued in 2017 (around 13-14 per cent on 90-day bills) had attracted investors and helped to support the naira.
Yields on 30 days, 60 days and 365 days short-term paper stood at 14.70 percent, 15.30 percent, and 15.80 percent on Friday, according to data from FMDQ Website.
However, Nigerian banks may find it more difficult to sustain their profitability this year, given the decline in net treasury bill issuance by the federal government this year.
This mean could the end of free money for AXA Mansard and other registrars that had made money from short term government securities.
“We expect falling treasury bill yields and lower issuance to put pressure on Nigerian banks’ profitability in 2018,” said Flitch.
Further analysis of AXA Mansard’s financial statement shows underwriting profit declined by 14 percent to N2.58 billion in December 2017 from N3 billion the previous year.
The Nigerian insurer’s claims expenses surged by 69.23 percent to N15.84 billion in the period under review as against N9.36 billion as at December 2016.
Claims ratios moved to 53.39 percent in the period under review from 67.27 percent as at December 2016.
AXA Mansard’s gross written premium increased by 29.50 percent to N26.82 billion in December 2017 from N20.71 billion as at December 2016.
Net premium income followed the same growth trajectory as it increased by 25.95 percent to N13.78 billion in the period under review from N10.95 billion as at December 2016.
AXA Mansard has a solvency ratio of 147.08 percent in the period under review. In other-words, the insurer can meet claims payment and other obligation.
AXA Mansard Insurance Plc has agreed with IFC, Africa Capital Alliance (a Private Equity fund) and other strategic investors to finance the construction of a 150-bed hospital and two 10-bed clinics in Lagos.
Upon completion, the Project will be one of the largest and best resourced private hospitals in Nigeria and will provide a variety of inpatient and outpatient healthcare services. The project is estimated to cost circa N28 billion and would be funded through an equal mix of equity and debt.
BALA AUGIE
