AXA Mansard Insurance Plc has projected a fall in Profit After Tax (PAT) by 30% in the first quarter of 2022 from the amount recorded in third quarter 2021 amid rising cases of Omicron Covid-19 variant.
This is contained in a disclosure which the insurer filed to the Nigerian Exchange and seen by Nairametrics.
According to the disclosure, AXA Mansard is expected to deliver a N2.67 billion in the first three months of next year as against the N3.8 billion recorded by the end of third quarter this year.
Highlights from the report
From the report, the insurer expects a N28.6 billion gross premium written for the forecast period, a slight dip from the N29.9 billion in third quarter of 2022 whilst scaling its net premium income up to N14 billion by March next year from the N11.4 billion recorded as at September 2022.
In addition, total net claims expenses for the opening quarter of 2022 is expected to decrease to N6.1 billion from the N7.8 billion net underwriting expenses in the third quarter of 2021 while the underwriting profit will expectedly reach N4.1 billion compared to N5 billion in respective periods.
Other items such as underwriting profit as well as operating expense are expected to record N4.2 billion and N2.8 billion respectively while profit before tax and profit after tax are expected to reach N3 billion and N2.7 billion respectively in the first quarter next year.
What this means
Taking a deep dive into the report, Nairametrics found that the insurer is not expecting to raise income level in first quarter of 2022 beyond what it recorded in third quarter this year, but analysts say this could be a result of the uncertainty which the year 2022 holds.
The Nigerian subsidy removal which threatens inflation in the country; a disequilibrium to the unwavering salaries and wages earned by most citizens, is likely to push insurance to the lower hierarchy of need of an average Nigerian causing insurers to record low premium income level.
Similarly, the new Omicron virus poses risk to the economy in 2022 and may affect the operation of insurers next year.
While lower premium income may not necessarily affect the profit for the year as the net claims income makes up, the new Covid variant could have significant impact on the investment income of insurers as carriers like AXA Mansard will likely see lower income on investment in the first quarter of 2022 at N1.8 billion.
As seen in recent times, Covid-19 led to significant drop, especially in investment income. According to 2021 World Investment report by the United Nations Conference on Trade and Development (UNCTAD), Africa’s share of total global FDI inflows for developing economies fell from 6.3% to 5.9% between 2019 and 2020 driven largely by Covid-19.
Evidently, in 2020, AXA Mansard also saw a N1.9 billion investment income in the third quarter of the year – at the peak of the Covid-19 period. This is low compared to the N4.6 billion realized in the same period of 2021.
Does that projection signify a dip?
The first quarter of 2022 cannot be benchmarked against a third quarter of 2021.
2022 is a new financial year