Cornerstone Insurance profit increases to N778.5m, slashes exchange loss in Q1, 2023
By Philemon Adedeji
Cornerstone Insurance Plc has reported a big slash in net exchange loss from about N763 million in the first quarter of last year to less than N17 million at the end of the first quarter has powered multiple jumps in after-tax profit to N778.5 million.
But last year the company suffered a drop in profit when group after-tax profit went down from N3.5 billion in 2021 to N2.5 billion in 2022.
It earned 4 kobo per share at the end of the first quarter in March 2023 compared to an insignificant figure in the same quarter last year.
The cost reduction provided the saving grace for the composite risk underwriter to head off possible profit drops in the face of poor underwriting results.
The first quarter interim financial report of the company for the three months ended March 2023 shows that management faced a bad combination of rising net claims and underwriting expenses against a sharp drop in claims recovery from reinsurers.
A further constraint came from slow growth in net underwriting income, which was insufficient to cover the cost increases.
A drop of 55.6 per cent in insurance claims recovery from reinsurers to N276 million over the same period added to the pressure, resulting in an increase of 35 per cent in net claims expenses to about N1.2 billion at the end of the period.
Net underwriting expenses also grew by 19 per cent year-on-year to N1.3 billion – which encroached on net underwriting revenue for the period.
At less than N3.4 billion, the group’s net underwriting income grew by less than 7 per cent in the first quarter, which is an increase of just N213 million.
However, net claims expenses and net underwriting costs rose by N300 million and N209 million respectively over the review period. Underwriting results, therefore went down by 24 per cent or N294.5 million to close at N918.5 million at the end of the first quarter.
The slow growth in net underwriting income was induced by a major negative change of 444 per cent in life fund to stand at close to N1.3 billion at the end of the first quarter. There was also an increase of 27 per cent in the annuity life fund to about N206 million during the period.
Despite a decline of 29 per cent in reinsurance expenses, the negative changes made a great difference between an increase of 16 per cent in gross premium earned to N6.9 billion and a slower growth of 10 per cent in net premium income to less than N3 billion at the end of the period.
A drop of 11 per cent in fee and commission income to N404.6 million extended the pressure, reducing the increase in net underwriting income to 7 percent to below N3.4 billion.
Three major favourable developments on the investment arm of the company’s operations worked to change the earnings story from the drop in underwriting results to a 10 times leap in the bottom line.
These were led by a major slash in net foreign exchange loss of about N763 million that gulped earnings in the first quarter of last year to less than N17 million at the end of the first quarter in March 2023. The cost savings provided the biggest upward push to build profit in the quarter.
This is followed by outstanding growth in fair value changes in financial assets – which went close to doubling at 97.4 per cent to close at N251.5 million for the first quarter.
The third level of support came from investment income that grew by 27 per cent year-on-year to close at N743 million for the first quarter.
The combination of revenue gains and cost savings enabled Cornerstone Insurance to more than counter the poor outing in the underwriting business and register a towering growth of 898 percent in after-tax profit to N778.5 million in the first quarter.
