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Retiree Life Annuity fund portfolio increased to N463 billion in 2020 Q2

RLA increased to N463 billion in Q2 2020, representing a 15.34% marginal increase compared with the same period in 2019.

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NAICOM

The Retiree Life Annuity (RLA) has increased to N463 billion in Q2 2020. This represents a 15.34% marginal increase compared with the same period last year.

This is according to the quarterly RLA publication of the National Insurance Commission (NAICOM).

READ: Why NEM Insurance Plc is considering increasing its issued share capital

  • The RLA portfolio has so far recorded 83,917 contracts purchased for a total premium of N376.6 billion as at end of 2020 Q2. This depicts 2.69% and 1.58% growth in count and volume, respectively in 2020 Q2 from end of 2020 Q1.
  • The Industry fund portfolio grew by 15.34% from N401.5 billion to N463.1 at the end of 2020 Q2.
  • The YoY growth for RLA business during the last three years averaged 25.45% in volume, while RLA fund portfolio growth has averaged 37.22%, notwithstanding the RLA payouts made (cumulative total payments of N167.2 billion as at end of 2020 Q2).

(READ MORE: Lagos 2021 Appropriation Bill scales through second reading)

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From the graph above it is clear that irrespective of the cumulative annuity payouts, fund balance (N463.1 billion) still exceeds the sum of cumulative premium amounts received (N376.6 billion). Indicating the growth in the RLA business and a positive future outlook for the business in Nigeria.

READ: CHI gets NAICOM’s nod on micro life assurance  

Further analysis of the periodical increments in the cumulative premium amounts received and RLA fund portfolio respectively, depicts the growth rate for premium receipts is receding, while the growth rate for the portfolio fund balance is volatile. This could be attributed to the volatility in interest rate.

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What this means

The performance generally mirrors the contribution of RLA to the insurance sector. This strength is confirmed by the fact that the net premium balance is only 45.21% of fund balance, indicating the strength of RLA portfolio to the sector. Also, the difference in fund balance (N253.7 billion) relative to net premium balance is an indication that annuitant can be rest assured that, all things being equal, they are guaranteed payout when needed.

READ: How to build a profitable Mutual Fund Portfolio

What you should know

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The RLA is a financial product that features a predetermined periodic payout amount until the death of the annuitant. An annuitant typically pays into the annuity on a periodic basis when they are still working.

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Annuitants may also buy the annuity product in one large, lump-sum purchase, usually at retirement. RLA is commonly used to provide guaranteed and/or supplemental retirement income that cannot be outlived.

(READ MORE: Verod Capital to acquire Law Union & Rock Insurance)

Retiree Life Annuity can be purchased from a Life Insurance Company licensed by the NAICOM and authorized to sell RLA under the regulation on retiree life annuity.

The NAICOM was established in 1997 by the National Insurance Commission Act 1997 with responsibility for ensuring the effective administration, supervision, regulation, and control of insurance business in Nigeria and protection of insurance policyholders, beneficiaries, and third parties to insurance contracts.

1 Comment

1 Comment

  1. Fasasi Wasiu

    November 19, 2020 at 2:30 pm

    This is a great news. I hope Nigeria will capitalize on this and take up a plan appropriately

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Financial Services

Despite CRR debits, Nigerian Banks record higher net interest income

Banks are recording higher net interest income, despite the CBN’s frequent CRR debits chalking off significant amounts of their cash.

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Some of the top banks in Nigeria posted a total net interest income of N403 billion in the third quarter of 2020 compared to N369.5 billion in the same period in 2019.

In the first 9 months to date, the banks have reported a combined net interest income of N1.2 trillion compared to N1.1 trillion same period last year.

READ: Aviation: Nigerian ground handling firms count revenue losses due to pandemic-induced plunge

Nairametrics collated these figures from the following banks, FBNH, UBA, GT Bank, Access Bank, Zenith Bank, Fidelity Bank, Stanbic IBTC, Sterling Bank, and Union Bank. The banks recently released their third-quarter interim results.

Deposit money banks have complained bitterly over the central bank’s frequent CRR debits chalking off significant amounts of cash that they could have earned on.

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READ: Union Bank releases Q1 2020 result, records 14% profit increase

A Nairametrics report indicates banks suffered CRR debits of over N1.9 trillion in the second quarter of 2020, taking the total amount of customer deposits held by the CBN at about N6.5 trillion.

The figure is likely higher now as more CRR debits have occurred in the third quarter of the year. Nairametrics reported banks were debited N226 billion CRR debit in a recent update provided by reliable sources.

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However, as the above report indicates, the banks still earned more this year compared to 2020. Where banks may have suffered dips is in net interest margin, a measure of the percentage of income banks earn after netting off the cost of funds.

READ: Nigerian Banks issue N3.3 trillion in new loans in June 2020

However, this has also been largely mitigated by low deposit rates even as banks maintain most of their lending rates.

Despite the rise in net interest income for the collection of banks under our review, some banks individually faired worse in 2020 compared to 2019. FBNH, Stanbic IBTC, and Access Bank all recorded lower net interest income in the first 9 months of 2020 compared to the same period in 2019. Significant gains over the prior year were however recorded with the other banks.

READ: Access Bank Plc posts N102.3 billion profit in 9M 2020, up by 15.7% YoY

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What is driving Margins

Banks are recording higher net interest income largely because interest rates on deposits are at near-record lows.

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This drive down in the cost of funds helps boost the income of banks because they are also yet to significantly drop their lending rates.

In the first 9 months of the year, the banks reported total loans and advances of N1.6 trillion, 14% higher than the N1.4 trillion reported at the end of 2019.

READ: FBN Holdings Plc posts Profit of N21.9 billion in Q3 2020

Banks have also reported generally improved pre-tax earnings, posting a combined N737 billion in the first 9 months of 20120 compared to N723 billion in the same period last year.

The better than expected results has triggered a boost to their share price. Banks have also seen their share price rally in recent weeks as investors finally recognize their low valuations amidst strong earnings.

The Banking sector index is up 14.72% year to date and only fell last week after investors embarked on cashing out their profits.

Explore Data on the Nairametrics Research Website

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Financial Services

AXA Mansard Insurance Plc set to raise company’s share capital to N18 billion

AXA Mansard Insurance Plc. has announced its plans to embark on a share consolidation and issuance of bonus shares exercise.

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AXA Mansard Insurance Plc

AXA Mansard Insurance Plc. has announced its plans to embark on a share consolidation and issuance of bonus shares exercise required to take the company’s share capital to N18 billion.

This announcement is contained in a notice, signed by the firm’s Secretary, Mrs. Omowunmi Mabel Adewusi and sent to the Nigerian Stock Exchange market, as seen by Nairametrics.

What you should know

The corporate decision is part of the resolutions of the Board of Directors of AXA Mansard Insurance Plc. subject to shareholders’ approval and other regulatory requirements.

Some key highlights of the notice are:

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  • That the Management of the Company is set to carry out the share consolidation and issuance of bonus shares exercise required to take the Company’s share capital to N18billion.
  • That the bonus issue exercise may be done at once or in phases, provided the Company meets the September 30, 2021 deadline set by the Commission.
  • That subject to regulatory approvals, the Company would hold an Extra Ordinary General Meeting to obtain shareholders’ approval of the Share consolidation and Bonus Share
  • That the Board and Management be and are hereby authorized to appoint such advisers, professionals, and parties that they deem necessary, upon such terms and conditions that the Directors may deem appropriate with regard to the aforementioned Share Consolidation and Bonus Issue Exercise.
  • That the Board of Directors be and are hereby authorized to take all steps and do all acts that they deem necessary for the successful implementation of the above stated resolutions.

Why it matters

The corporate action is a deliberate and strategic way of meeting up with the new and revised minimum paid up share capital requirements for composite firms, which is currently pegged at N18 billion.

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Financial Services

CRR Compliance: Banks suffer another N226 billion in CRR debits

Nigeria banks have had their vaults debited of N226 billion by the Central Bank of Nigeria in the apex bank’s latest CRR sequesters.

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CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

Deposit Money Banks (DMBs) have collectively suffered a debit of N226 billion in compliance with the Cash Reserve Requirements (CRR) fixed by the CBN.

According to a reliable source, the debit occurred in the week ended November 20, 2020. This follows a whopping N917.5 billion debit recorded a month ago as reported by Nairametrics. The central bank imposed CRR sequesters on banks that fail to meet its minimum lending targets as a percentage of deposits.

READ: Nigerian economy slips into recession as GDP contracts by 3.62% in Q3 2020

In its September monetary policy communique, the bank claimed its policy measures have led to increased lending in the economy emphasizing the need to double down on it.

“The Differentiated Cash Reserves Requirement (DCRR) and the minimum Loan-to-Deposit Ratio (LDR), have ensured a significant stream of credit to the real economy. As at end-August 2020, aggregate bank credit had risen by about N3.7 trillion relative to its level in May 2019, when the LDR policy was introduced. The outlook for credit to the economy remains positive given that these policies are still in place and, importantly, that the banking industry continues to be resilient.”

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READ: Africa’s internet economy has the potential to reach 5.2% of the continent’s GDP by 2025 – Goggle/IFC

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                                            Source: Nairalytics Research

READ: Banks guaranteed N3.6 billion loans to farmers under the ACGSF – CBN

What you should know

  • Out of the N226 billion debited for November 2020; top five (5) banks in Nigeria – FUGAZ, bore the biggest brunt, with a combined debit of N137.5 billion, implying that the top 5 banks accounted for 60.8% of the total debit for this month.
  • The break down of the debit for the top five banks are; GT Bank (N59.5 billion), Zenith Bank (N30 billion), FBN (N20 billion), Access (N18 billion), and UBA (N10 billion).
  • Nairametrics had earlier reported that CBN increased the CRR in January by 5% to 27.5% to address monetary-induced inflation, whilst retaining the benefits from the CBN’s LDR policy.
  • Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

READ: FUGAZ Banks suffer N1.9 trillion in CRR Debits in Q2

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