Wapic’s drop in Profit Validates Analysts’ Ppredictions

Wapic plc’s first quarter (Q1) profit fall has validated analysts’ expectations of weaker earnings, even as the Nigeria insurer’s re-organisation is gathering momentum with new investors set to take the firm to the next growth phase, sources tell press.

For the first three months through March 2015, Wapic’s net income fell by 29.67 percent to N110.04 million from N156.67 million the same period of the corresponding year 2014.

The company’s stock dropped 3.70 percent to N0.52 by the 3:55pm close in Lagos, Nigeria’s commercial capital.

“Despite the relatively low claims environment in Nigeria, Wapic’s projected earnings are expected to be dampened by its substantial fixed costs,” said A.M. Best in its December 2014 ratings of Wapic Insurance plc.

The faltering profit of the Nigerian insurer was due to a 32.94 percent increase in operating expenses to N844.17 billion in 2015 compared with N638.09 million in 2014.

Wapic’s underwriting capacity was weak as net premium income (NPI) increased by a single digit 2.05 percent to N899.25 million in 2015, as against N881.14 million the previous year.

Gross premium followed the same trend as it also grew by 3.42 percent to N2.71 billion in 2015 from N2.62 billion the previous year.

Net underwriting income increased by 6.39 percent to N1 billion, thanks to a 76.92 percent in fee and commission income.

Wapic’s growth prospects look bright as the insurer begins to leverage new rules that should add to the bottomline.

National Insurance Commission (NAICOM) has enforced rules requiring companies with at least five workers to provide life coverage. The NAICOM is also making property insurance mandatory in the nation of more than 170 million people.

It also enforced the ‘No Premium, No Cover’ regulation. This is a section of the 2003 Insurance Act that stipulates that premiums must be paid for before an insurer can incept cover.

“Positive rating actions could occur if Wapic successfully implements its business plans,” said the A.M. Best report. “This includes demonstrating a track record of solid underwriting performance while maintaining a strong level of risk-adjusted capitalisation,” the report added.

Wapic’s total assets increased by 12.83 percent to N23.77 billion in 2015 from N22.05 billion in 2014; thanks to a 42.66 percent in financial assets. The company’s return on equity (ROAE) was flattish at 1 percent.

Wapic is a small insurance group that has been operating under new management since 2013, following its divestment by Access Bank. Wapic is a domestic non-life entity, which wholly owns a life insurer in Nigeria and a non-life insurer in Ghana.

Wapic’s market capitalisation was N7.22 billion, while total number of outstanding shares stood at 13.38 billion.