African Alliance Insurance Plc, one of Nigeria’s oldest life assurance specialists, faced severe financial pressures during the first quarter of 2023, recording a total comprehensive loss of N1.72bn compared with a net profit of N1.07bn in the corresponding period of 2022.
Founded in 1960, the pioneer life underwriting firm has continued to battle structural and operational headwinds within the Nigerian insurance industry. Underwriting income declined across key segments, prompting the company’s management to evaluate operational efficiency, as detailed in its management report titled “Underwriting and investment contractions pressure Q1 performance”.
Operating performance saw a sharp downturn, driven by a net underwriting loss of N993.35m in contrast to the N480.21m profit recorded in Q1 2022.
Top-line revenue shrank over the period, with gross premium written falling 20 per cent from N2.36bn to N1.88bn. Gross premium income also contracted 15 per cent to N1.87bn, while net premium income settled at N1.80bn, down from N2.14bn in Q1 2022.
The company’s key financial ratios reflected these operational challenges. The loss ratio rose to 66 per cent from 51 per cent in the prior-year period, while the expense ratio grew to 20 per cent. Consequently, the combined ratio increased from 67 per cent to 86 per cent. Underwriting margin reversed sharply from a positive 22 per cent to a negative 55 per cent, and return on equity slid to a negative 272 per cent.
The African Alliance’s balance sheet also contracted. Total assets fell by two per cent from N49.53bn at year-end 2022 to N48.31bn as of 31 March 2023. Total liabilities edged up by one per cent to N47.68bn, driven primarily by insurance contract liabilities of N41.64bn and investment contract liabilities of N4.00bn. Total equity deteriorated 73 per cent from N2.35bn to N631.46m. Basic loss per share stood at N0.08, down from earnings per share of N0.05 in Q1 2022.
The insurer continues to operate below key regulatory capital standards amid persistent industry-wide recapitalisation demands by the National Insurance Commission. Management disclosed in the reporting notes that “the company did not meet the minimum capital requirement of N2bn as stipulated by the Insurance Act”.
The solvency margin position closed at a deficit of N7.27bn, resulting in a net solvency ratio of negative 363 per cent. Executive Director, Finance, Olabisi Adekola, and Managing Director/Chief Executive Officer, Joyce Ojemudia, formally authorised the management financial statements on 15 June 2023.
