Sovereign Trust Insurance Rebuilds Reserve With N815m Profit in 2022

With an after-tax profit of N814.6 million at the end of the 2022 fiscal year, Sovereign Trust Insurance Plc’s many years of accumulated losses have finally come to an end.
The company’s management, which is managed by Olaotan Soyinka, has completed this task and made it possible for shareholders to receive dividend payments.

Towards the end of 2018, retained deficits that reached as high as N1.4 billion have been eliminated, and positive retained profits in the neighborhood of N122 million have been generated.

By the end of December 2022, the firm will release its unaudited full-year financial report, which will include these figures.

Nonetheless, the company’s profit for the year fell by 16.4% from the year’s ending total of N974 million. The decrease in earnings comes after a final quarter that fell short of expectations for a higher performance, with profit falling by 66.7 percent on a quarterly basis to less than N123 million.

The shift caused the company’s reading to alter from a gain of 14 percent in profit to N692 million at the end of the third quarter to a loss for the whole year.

The fourth quarter’s decreased profit includes changes on both the cost and revenue sides, notably an almost threefold increase in reinsurance costs quarter over quarter to N845 million. As a result, throughout the period, net premium income decreased from about N3 billion to N2.2 billion.

Net underwriting income decreased from N2.9 billion to N1.9 billion quarter over quarter while negative fee and commission income increased during the same time period from N88 million to N298 million.

The reduction in claims expenditures from N1.4 billion in the same time in 2021 to N183.6 million in the fourth quarter of 2022 is a significant positive development that contributed to offset the cost increases in the quarter.

The significant cost savings from claims expenditures that resulted drove a rise in underwriting profit of 11.6 percent to N747 million for the quarter. Nevertheless, the cost savings were offset by a decline in investment revenue and a rise in operational and administrative costs, which brought the operating profit for the quarter down to around N109 million.

The lack of an exchange gain that would have contributed N207 million to earnings in the same time in 2021, an increase in financing costs, and a change from a tax credit of over N184 million to an expenditure of N20 million over the same period all put further pressure on the bottom line in the quarter.

The company’s management has consistently maintained profitability throughout the years despite the year’s decline in profit in order to situate the general business underwriting firm for future development. Since 2017, the business has consistently improved profits, with the exception of 2022.

The management has prepared the groundwork for the distribution of dividends to shareholders—who have been on a dividend vacation for years—by replenishing the retained profit account. This is a significant accomplishment for Soyinka, who promised the company’s owners that he would elevate it to the forefront of the insurance sector.

The business ended its full-year operations in 2022 with a net premium income of N6.9 billion, a decrease of 4.7%. Even while fee and commission revenue increased by 13.4% to N884 million at the end of the year, net underwriting income actually decreased by 2.8 percent to N7.8 billion.

The full-year number decreased by 25% to N2.4 billion because to the substantial decline in claims expenditures in the last quarter, while overall underwriting expenses increased by 14% to N2.8 billion.

At the conclusion of the year, underwriting profit increased by 9% to N2.6 billion as a result of the cost savings from claims expenditures.

The company’s pre-tax profit increased by 9% to N958 million despite losses in investment income and exchange gain as well as an increase in financing costs.

The change from a tax credit of N184.5 million in 2021 to a tax expenditure of over N144 million in 2022 accounts for the variation in pre-tax and after-tax earnings.

In contrast to the 8 kobo per share it earned in 2021, the corporation ended the year with 7 kobo in earnings per share.

Shareholders may now anticipate receiving a dividend payment.

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