Aiico Insurance plc half-year profit drops 22.60 percent on rising operating costs, analysis of the financial statement shows.
For the first six months of the year, Aiico’s net income plummeted by 22.37 percent to N1.13 billion from N1.46 billion the same period of the corresponding period (HY) 2013. Earnings per share (EPS) reduced to 16.43k in HY 2013 from 22.35k as of HY 2013.
Analysts say the Nigeria insurer should cut costs as this will help boost bottom-line performance and enhance higher returns to shareholders in form of dividend payment.
In order to re-position the Nigeria insurer for better efficiency and collection of cash from policy holders, National Insurance Commission (NAICOM) introduced the ‘No premium No cover policy.’
However, the company seems not to be tapping into the aforementioned opportunities as underwriting profits were down by 39.85 percent to N1.93 billion from N3.21 billion in the preceding year.
The fall in the bottom-line performance of the company was as a result of spiralling costs it incurred in the review period.
Total underwriting expenses increased by 21.92 percent to N9.73 billion in HY 2014, compared with N7.98 billion as of HY 2013, while management expenses surged by 35.98 percent to N1.62 billion.
There were however growth at the top-line level as gross premium income moved by 9.83 percent to N12.95 billion as against N11.79 billion last year, while net premium income jumped by 7.32 percent to N10.28 billion.
Aiico sees the privatisation of the power sector for better efficiency as a gateway to tremendous business opportunities given the paltry contribution of the sector to the Nigeria economy.
The insurance sector contributed just 0.57 percent to the Nigeria economy of $510 (N80.22trn) lagging behind countries like Kenya and South Africa.
Total assets were up by 24.94 percent to N51.94 billion as against N41.57 billion the same period of the corresponding year HY 2013. Retune on average equity (ROAE) and the return on average assets were 7.05 percent and 2.80 percent, respectively.
Aiico has also been working on partnership with telecom operators in order to utilise their platforms in reaching mobile subscribers with health insurance products, according to Olusola Ajayi, head of retail business of the company, in a note released in April.
“After taking care of basic needs like food, clothing and shelter, the next most crucial need most people focus on is healthcare.
“So, Aiico will focus on reaching this group; and though the company anticipates much better success in this regard, there is still room for improvement,” he said.
The company’s share price closed at N0.81 – August 18, 2014, on the floor of the Nigerian Stock Exchange, while market capitalisation was N7.21 billion.
BALA AUGIE
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