AIICO Insurance Plc reports N11 billion underwriting losses in H1 2020

AIICO INSURANCE PLC recorded double digit increase in gross premium written and single digit decline in profit after tax in the first half of 2020 due to significant increase in investment and other income despite recording huge underwriting loss, according to the interim report and accounts for the period ended 30 June 2020 released by the company to the Nigerian Stock Exchange (NSE) and the investing public.

The gross premium written rose by 26% to N31.923 billion in H1 2020 from N25.422 billion in H1 2019. However, AIICO reported a 2% drop in profit for the year to N2.789 billion from N2.851 billion in H1 2019, with EPS sliding to 40kobo from 44kobo.

AIICO recorded 92% rise in it’s underwriting losses to minus N10.859 billion from minus N5.648 billion in H1 2019. Nevertheless, it brought in N19.528 billion from “investment and other income” a 51% increase from N12.911 billion recorded in the same period in 2019.

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The decline in profit is as a result of increase in the company’s expenditures such as;

Claim expenses rose to N14.455 billion in H1 2020 from N12.318 billion in H1 2019
Overhead expenses rose to N6.497 billion from N4.248 billion in H1 2019
Reinsurance expenses increased to N3.284 billion from N2.782 billion

Total assets rose by 38% to N219.679 billion as at 30 June 2020 from N159.476 billion as at 31 December 2019. Major changes in the assets column are;

Financial assets increased by 44% to N183.078 billion from N126.827 billion
Trade receivables rose by 138% to N919.044 million from N386.749 million
Cash and cash equivalents rose by 28% to N12.867 billion from N10.080 billion
Reinsurance assets rose by 55% to N8.477 billion from N5.461 billion
Deferred acquisition costs rose by 48% to NN721.222 million from N488.884 million
Assets classified as held for sale amounted to N2.177 billion against although none was recorded as at 31 December 2019
Other receivables and prepayments dropped by 73% to N1.654 billion from N6.228 billion

In line with the assets, the total liabilities jumped by 44% to N188.057 billion from N130.566 billion as at 31 December 2019. Major changes in the liabilities are;

Insurance contract liabilities rose to 26% to N106.913 billion from N84.986 billion in H1 2019
Investment contract liabilities increased by 19% to N19.307 billion from N16.201 billion
Other payables and accruals rose by 214% to N11.468 billion from N3.650 billion
Fixed income liabilities rose by 133% to N46.859 billion from N20.143 billion
Deferred tax liabilities declined by 75% to N155.866 million from N629.281 million
Borrowing dropped 43% to N1.504 billion to N2.629 billion in H1 2019.

AIICO’s total equity increased by 9% to N31.822 billion as at 30 June 2020 from N28.910 billion as at 31 December 2019. Major changes in components of equity are;

Issued share capital rose by 63% to N5.665 billion from N3.465 billion
Share premium increased by 106% to N5.826 billion from N2.824 billion
Retained earnings increased by 41% to N8.294 billion from N5.889 billion
Contingency reserve rose by 6% to N6.703 billion from N6.320 billion
Deposit for shares declined by 100% to zero against N5.280 billion registered as at 31 December 2019 mainly due to ordinary shares of 4,399,998,440 with nominal value of 50kobo each at market price of N1.20kobo worth N5.202 billion.
Fair value declined by 5% to N1.890 billion from N1.995 billion while statutory reserve declined by 1005 to zero against N167.874 as 31 December 2019.

Just 14.39% of AIICO’s total assets is financed by equity.

AIICO’s cash flow remained strong with cash and cash equivalents as at 30 June 2020 amounting to N12.867 billion. The net cash from operating activities greatly improved to N42.940 billion from N5.719 billion in the same period in 2019.

The cash from its investing activities came in negative at minus N37.608 billion mainly due to “Purchase of financial assets at fair value through profit or loss” – N107.358 billion, “Purchase of financial assets at fair value through other comprehensive income” – N58.605 billion, N138.078 billion recorded as ”Proceed on disposal/ redemption of financial assets” .

The company registered minus N1.208 billion as the net cash from financing activities due to “convertible loan & interest payment” which equals to the same amount.

AIICO is into the business of providing insurance services to individuals and corporate clients and investment. It is listed on the main board of NSE under the financial services sector.

The share price stood at N0.94 at the close of trading on Wednesday. The 52 week high and low prices are N1.22 and N0.61 respectively. YTD the share price is up by 30.56% while in two years and five years it is up by 32.39% and 14.63% respectively. The six years share price movement is shown below;