Royal Exchange Plc, like its peers, has continued to witness pressure on its earnings following harsh operating milieu. CHRIS UGWU writes
Various factors such as shrinking federaland state governments’ revenues, unavoidable devaluation of naira and high energy costs, resulting in inflammatory landscape, increased challenges being faced by insurance companies in Nigeria.
Access to forex by businesses and individuals alike became very difficult as the year progressed and the gap between the interbank and parallel market became very high, compounded by COVID-19 ravaging the world.
The effect was low capacity utilisation by industries and outright shutdown of many plants with attendant layoff impacting the ability of businesses, individuals and governments to enter into insurance contracts and pay appropriate insurance premiums. Business productivity was generally stifled.
Unbridled competition in the industry also drove rates well below acceptable limits and further reduce the quantum of premium income available. Hence, Nigerian insurance are grappling with reduced premium growth due to economic crunch, higher impairments from oil & gas exposures, and increasing regulatory capital requirements.
This is despite the industry witnessing tremendous changes as a result of more reforms by the National Insurance Commission (NAICOM), which include the introduction of market conduct reforms, claims settlement reforms as well as financial inclusion, among others.
The initiatives are all geared towards enhancing transparency in the industry and improving the general perception and image of insurance business in Nigeria.
However, despite these measures, the insurance sub-sector is still in a state of despondency. The sub-sector has found itself battling a variety of challenges as they work to improve profitability, grow and compete.
And this challenges, which also include long held negative perception, have continued to weigh on the bottom line of most of the companies in the sub sector.
Royal Exchange Plc is one of the companies that have got a fair share of the dwindling fortune of the subsector. The company is among the insurance firms that have remained at nominal level in share price.
The financial services group with interest in life and general insurance, microfinance, asset management and healthcare ended the Q4’21 in red with a loss after tax of N973.243 million. Expectations that the company would come out of the woods and revert to profitability seems to be dashed following harsh operating milieu and recapilisation programme being pushed by the sector regulator.
The rising claims experience in recent times by the company like its peers has upstaged the rate of growth in premium, a development, which industry watchers say is threatening the profitability of the company and the industry as a whole. The share price closed at 96 kobo per share when the closing bell rang on Friday.
Royal Exchange Plc began 2019 financial in the red with a loss after tax of N187.556 million for the first quarter ended March, 31, 2109, from a profit of N389.914 million recorded during the comparable period of 2018.
Loss before tax stood at N142.088 million from N573.403 million posted in 2018. Gross premium written was N5.601 billion in 2019 from N7.679 million posted in 2018 accounting for a drop of 27 per cent.
Total underwriting expenses stood at N1.812 billion from N1.465 million posted in 2018. For the half year ended June 2019, the company posted loss after tax of N631.462 million as against a profit of N19.454 million posted in 2018. Loss before tax stood at N478.380 million from profit of N28.610 million in 2018 while gross premium written was N10.275 billion from N10.640 million posted in 2018.
Total underwritten expenses rose by 120.9 per cent from N1.920 billion in 2018 to N4.243 billion in 2019. Royal Exchange Plc reported a 187 per cent loss for the period ended September 30, 2019.
This was disclosed in the Insurance firm’s unaudited financial statements published on the website of the Nigerian Stock Exchange.
The financial statement shows that Royal Exchange generated N11 billion in its Gross Premium Income over the past nine months of 2019. This is indicative of 0.9 per cent decrease compared to N11.1 billion which was generated in Q3 2018.
The company recorded a loss before tax of N72.8 million in Q3 2019, compared to a profit before tax of N163.5 million in Q3 2018, representing a 145 per cent decrease.
The company recorded a loss after tax for the period under review to N96.2 million, compared to a profit after tax of N111.1 million in Q3 2018. This represents a 187 per cent decline.
The company’s earnings per share for the period stood at a loss of N2, as against N2 in the third quarter of 2018. Royal Exchange ended the 2019 financial year in the red with a loss after tax of N215.336 million from a loss of N156.176 million reported in 2018.
Loss before tax stood at N158.218 million from a profit of N326.871 million posted in 2018. Gross premium written was N14.200 billion in 2019 full year from N14.712 billion recorded during the comparable period of 2018. However, total underwriting expenses astronomically rose by 1,940 per cent to N7.499 billion in 2019 financial year from N367.475 million posted in 2018.
The group ended year 2020 with a loss after tax of N77.12 million from a loss of N1.31 billion in 2019 while loss before tax stood at N205.56 million from a loss of N290.53 million in 2019.
Gross premium written was N15.29 billion in 2020 from N14.21 billion in 2019 while underwritten expenses stood at N7.74 billion from N8,28 billion in 2019. Royal Exchange began the 2021 financial year with 10.45 per cent drop in profit after tax to N22.75 million for the first quarter ended March 31, 2021 from N25.41 million in 2020.
However gross premium written grew by 19.01 per cent from N6.21 billion in 2021 to N7.39 billion in 2021. For Q2 2021, Gross Premium declined by -12.7 per cent to N9.9 billion from N11.3 billion in the previous quarter.
Profit before tax declined by 62 per cent to N233 million from N617.76 million in 2020 while profit after tax equally declined by 62 per cent to N159 million from N420 million in 2020. Net Assets declined by -6.6 per cent from N7.5 billion to N7.1 billion against N7.54 billion in 2020. Royal Exchange’s gross premium for nine months ended September 2021 declined by -84 per cent to N2.2 billion from N13.7 billion in the previous quarter. Loss before tax stood at N523 million from profit of N832 million in 2020 while loss after tax stood at N536 million from a profit of N566 million in 2020. Total unwritten expenses was N2.065 billion from N5.417 billion in 2020.
The firm recorded a loss after tax of N973.243 million for the q4 ended December 2021 from a loss of N77.116 million recorded in 2020. Loss before tax stood at N737.306 million as against a profit before tax of N130.040 million in 2020. Gross premium written stood at N2.861 billion in 2021 from N15.292 billion in 2020, accounting for 81.29 per cent. Total underwritten expenses stood at N2.695 billion in 2021 as against N7.738 billion in 2020.
Speaking on the future of the company at its 52nd Annual General Meeting (AGM) in Lagos, Chairman, Kenny Odogwu, said the board and management were confident about the future of the company.
He assured that they were doing everything within their power to ensure the future of the company is brighter and better. Explaining the company’s efforts to recapitalise, he said while Royal Exchange General had concluded its recapitalisation process, they were on course to conclude that of life business.
On technology, he said: “The new world class software we acquired and deployed to our insurance subsidiaries has started yielding positive fruits by making our workforce seamless.” On the company’s digitalisation plan, he said: “In order to remain competitive as a fledging insurance superpower and in line with our strategic implementation of our digitalisation plan, the newly upgraded website has many features including call-to- action/sale capabilities which is customer focus.
“Clients can now log in and purchase insurance cover online and our call-centers too is now up and running with 24- hour facilities to attend to enquires.” Ben Agili, Managing Director/ CEO, Royal Exchange General Insurance Company Limited (REGIC), had said REGIC, as part of her business diversification strategy,
had made significant progress in championing product innovations in the following areas, amongst others: Agricultural Insurance; Digital/Mobile Insuranc; .Royal Titanium Motor vehicle insurance; as well as Entertainment Insurance.
“Our new corporate strategy now hinges on the use of digital technology to expand our operations and service delivery by disrupting the market place. Innovation now plays a critical part of our corporate DNA, stating that we aim to evolve as an insurance company with insurtech capabilities.
“Our journey for corporate renewal and operational transformation is targeted at building an enduring insurance company of tomorrow; one which is able to disrupt itself today, innovate and build upon its current foundation to remain in business firstly and secondly contend for the spot of market leadership.”
Effective risk management, alongside a tailored product offering, are vital to bringing more Nigerians into the market and boost insurance, but unless more focus is given to training new actuaries, insurance firms will continue to bear the brunt of the massive slow-down in economic activity as revenue from premium income drops significantly.