AIICO Insurance has reported a significant drop in its profit for the second quarter of 2024, falling from N9 billion in the first quarter to N3.9 billion. This decline comes in the wake of a dramatic shift in net finance income, which reversed from a N13 billion gain in the first quarter to a N15 billion expense in the second quarter.
The company had previously projected that net finance income would turn negative, impacting profit growth. This projection has materialized as a substantial negative finance result in the second quarter offset gains from improved underwriting and investment income.
The half-year financial report, ending June 2024, reveals that AIICO Insurance’s underwriting business and net investment income showed signs of recovery. The second quarter saw an insurance service result of N1.6 billion, a significant increase from the first quarter, and net investment income surged to N20 billion, reversing a previous negative figure of nearly N3 billion.
Despite these improvements, net finance income turned into a major drawback, with a N15 billion expense consuming the previous quarter’s income, leading to a net finance expense of N1.7 billion for the half year. This shift has notably affected the company’s profit margins.
The company’s after-tax profit decreased from N5.3 billion year-on-year and from almost N9 billion in the first quarter. For the half-year, net insurance revenue reached N48.8 billion, marking a 48% increase year-on-year. However, this revenue was significantly offset by insurance service and reinsurance expenses totaling N38.8 billion and N8.3 billion, respectively.
The increase in finance expenses is attributed to changes in interest rates and the time value of money, as detailed in the company’s financial notes.