Continental Reinsurance plc has fallen off the cliff as full-year profit dropped 51.18 percent stoked by additional back-duty taxes levy, rising operating and underwriting expenses.
A back-duty case is the amount of tax that should have been paid in previous years but was not assessed because the taxpayer failed to disclose full income details to the Inland Revenue Service (IRS).
Profit was N855.64 million in 2014, compared with N1.75 billion the previous year, the Lagos-based company said in an e-mailed statement on Monday 4, 2015.
Earnings per share (EPS) fell to 8k in 2014 as against 17k in 2013. The company is not using the resources of owners to generate higher profit as return on equity reduced to 6.02 percent compared with 12.25 percent the previous year.
Continental Reinsurance slow growth in profit was due to a 52.63 percent rise in operating cost and a 9.85 percent jump in insurance benefits and underwriting to N12.82 billion in 2014, from N11.67 billion in 2013.
The company’s insurance capacity is efficient as insurance premium revenue increased by 7.45 percent to N16.15 billion in 2014, as against N15.03 billion in 2013. Net insurance revenue moved by 6.30 percent to N14.19 billion in 2014, from N13.35 billion the previous year.
Premium for the insurance and reinsurance firms is improving as the regulator imposed the ‘No premium No cover’ policy, which stipulates that premiums must be paid for before an insurer can incept cover.
The National Insurance Commission is also making property insurance mandatory in the nation of more than 170 million people.
These stringent rules are expedient given the abysmal contribution of the industry to the Nigeria economy. The insurance sector contributed less than 1 percent to an economy $510 billion.
The company is aggressively seeking expansion across Africa with a view to increasing its share of the market. It plans to acquire rivals on the continent over the next three years.
Continental Reinsurance officially launched its North African office in Tunisia and extended its footprint in Africa with the opening of a regional hub for Southern Africa in Gaborone, Botswana, the company said in a statement on the website of the Nigerian Stock Exchange.
Its total assets increased by 7.93 percent to N28.20 billion in 2014, as against N26.12 billion the same period.
The company’s share price closed at N1.20 on the floor of the exchange, while market capitalisation was N9.75 billion.
BALA AUGIE
