December 19, (THEWILL) – Directors of AIICO Insurance Plc, one of Nigeria’s topmost insurance firms, received a total emolument of N290.881 million in 2020, the year that COVID-19 spread human suffering and destabilised the global economy in the worst dimension in a century. A study of the firm’s performance records showed that the figure was the highest remuneration paid to its directors since 1990, when AIICO Insurance was listed on the Nigerian Exchange as a public limited company. It was established in 1963 as a private enterprise.
The latest directors’ emolument was N93.241 million higher than the N197.683 million paid in the preceding year (2019) representing 47.1 percent. Over the last five years, the pay received by the directors rose from N197.683 million in 2017 to N198.111 million in 2018. No figure was recorded for 2016. The 2020 directors’ emolument, however, constituted only 3.84 percent of total operating expenses for the year – N7.552 billion which, on the other hand, was higher than the 2019 figure of N6.038 billion by 25 percent.
Profit after tax (PAT) in 2020 when the directors received the highest pay within three decades dropped to N4.980 billion from N5.718 billion in 2019 or 12.23 percent. The post-tax profit rose to N3.151 billion in 2018 from only N1.283 billion in the previous year. Profit before tax dropped to N4.632 billion in 2020 from N5.718 billion in 2019, representing 23.64 percent decline.
The firm’s gross premium income and net premium income recorded positive performance in 2020 to N60.680 billion and N52.779 billion, from N50 billion and N43.776 billion respectively. Net underwriting income also jumped from N45.643 billion in 2019 to N54.742 billion in 2020.
“Notwithstanding the drop in profit after tax, the other key fundamentals showed positive performance which could explain the quantum leap in directors’ remuneration for 2020. Remember it was a difficult year for businesses that also suffered the 15-month land border closure imposed by the Nigerian government which it said was meant to curb smuggling but ended up killing businesses while smuggling continued to thrive”, said Kenneth Agbamuche, an insurance practitioner.
Agbamuche told THEWILL that the performance of the insurance sector in 2020 was a corporate paradox that was yet to be resolved. “Not only in Nigeria, the insurance sector improved in the stock performance in most parts of the globe during the pandemic unlike other businesses that witnessed huge shrinkage, especially those in the consumer goods group. It is reflected in their profits and dividends.”
Dividend declared by AIICO Insurance in 2020 dropped to 5 kobo per share from 6 kobo in 2019; previous three years were 5 kobo, 2 kobo and 5 kobo in 2018, 2017 and 2016 respectively. Basic Earnings Per Share declined to 33 kobo in 2020 from 83 kobo in the preceding year, which was 60.24 percent.
The 2021 outlook does not show something more promising for the firm since the first quarter. Its unaudited interim report and financial statements for the period ended 30 September, 2021 showed 69 percent drop in total comprehensive income for the period to N1.372 billion from N4.436 billion in 2020. The profit drop was despite a 16 percent rise in gross premium written to N54.674 billion from N47.194 billion in 2020. This is contrary to the projections earlier made in the second half of the year.
AIICO Insurance Company in its operational statement for earnings forecast for the third quarter ending 30 September, 2021 sent to Nigerian Exchange (NGX) and endorsed by its Managing Director, Mr Babatunde Fajemirokun in June 2021 said; “our business is cyclical by nature, in which profits do not accrue evenly over the months but rather accrues more in the second half than the first half. Hence, the forecast for the second half is better than the first half forecast.”
At the company’s 51st Annual General Meeting held in Lagos on November 30, 2021, shareholders voted on several resolutions relating to corporate governance in the organisation as well as some special businesses. These included a bonus of twelve (12) shares for every nine (9) shares already held by members whose names appear on the register of members as of the close of business on November 23, 2021.
“Additionally, other resolutions presented to the shareholders were unanimously approved with the issuance of the bonus, clearing the path for the Company to meet up with new capital requirements from NAICOM. This strengthens the Company’s market position on its journey to being the dominant insurer in sub-Saharan Africa.
“During the interactive session, the shareholders applauded the Company’s leadership on its remarkable contribution to society through its various Corporate Social Responsibility initiatives and interventions. Its focus on its recapitalisation efforts also received a commendation for completing its private placement and rights issue,” the company said in a release signed by its Head, Strategic Marketing & Communications, Segun Olalandu.
The business boom that the insurance sector enjoyed in 2020 helped in improving the performance of AIICO Insurance as seen in its core revenue streams. Many businesses, especially in the manufacturing sector, slowed down significantly. Investors had to turn attention to the equity market which suddenly went bullish beyond expectation.
A major reason for the sudden bullish trend was the investors’ exodus from the low interest environment of the fixed income market. The Nigerian government had ‘decreed’ deliberate low-yield returns for the T-Bills and Bonds instruments to discourage the influx of investors to the safe fixed income market. The sustained CBN dovish position spurred a rally in the equities market that provided haven for investors fleeing low T-Bill and Bond yields.
The low-yield interest rate environment ignited an increase in stocks’ valuation leading to a good number of stocks recording price gains compared to their pre-rally status. This included stocks outside the bellwether group such as insurance which used to flood the dormant equities league.
The third factor for the stock market upward jump in 2020 was the ‘frustration’ of foreign investors who could not access forex to repatriate their profits or buy raw materials. They “had no better choice than to reinvest in the stock market”, said Uche Uwaleke, Professor of Capital Market at Nasarawa State University then. The biting forex scarcity discouraged investments even in the real sector.
Also, the controversial 15-month land border closure had its toll on many Nigerian manufacturing companies that could not export their products for the period. Among them is Cadbury Nigeria which reported a 14.4 percent slump in export sales, revenue to N3.3 billion in nine months in 2020, due to COVID-19 and closure of the land border. The search for alternative investment channels led to the boost in insurance stocks and business which AIICO Insurance benefited from through its business of providing life and health insurance, general insurance, investment management, and pension management services.
The company’s Strategic Marketing & Communications Department did not respond to a request sent to it for comment.