I am particularly happy to report that Sterling Assurance Nigeria Limited did significantly better in 2021 than in the previous year. Gross Premium written and Net Premium income exceeded what was achieved in 2020. Accordingly, Underwriting Result surpassed the previous year even though Investment Income was less than what was achieved in 2020 due to the parlous state of the Nigerian economy. The overall result was positive which has enabled us to further water down the loss brought forward from past years. Although the year 2021 presented a harsh economic environment, it no doubt marked a gradual return to normalcy from the depressing effects of the Corona Virus (Covid-19) pandemic on business operations
globally. The reality of Covid-19 is still with us but, in the midst of this, the company was still able to record some positive changes in 2021.The cheering news is the improvement in profitability in 2021 compared to past performance!
GLOBAL ECONOMIC OUTLOOK
Often times, happenings in other climes usually have significant effect on business activities or otherwise. The impact can be positive or negative as the case may be. Impacts on developing economies and the companies operating therein can be of great consequences. The global economy was projected by the International Monetary Fund (IMF) to grow by about 6% in 2021 not ruling out the challenges of a persisting pandemic with variants of the virus emerging and spreading all over the globe. The hope of economic growth was predicated on the anticipated improvement in the worldwide vaccine production and distribution. The projection was a sharp contrast to the -4.9% reviewed projection for year 2020 when total lockdown was prevalent for a significant part of that year.
Although economic recovery continued in the early part of the year under review, the International Monetary Fund (IMF) in their October World Economic Outlook Report reviewed the projected growth to 5.9%. This is a 0.1% lower than the earlier projection which was attributed to supply disruption in advanced economies and unabated pandemic signs for low-income countries. As at January 2021, the price of the benchmark crude Brent which was $54.77 per barrel had moved to $74.00 by December. The rising price of crude in the international market meant additional forex revenue for Nigerian Government. This should ordinarily translate to increase in the country's external reserves and also help in stabilizing the exchange rate of the local currency because oil is the country's major revenue earner. The above possibilities were eroded by huge fuel subsidy burden as N1.4 trillion was said to have been spent to
subsidize local consumption in 2021. However, the global economy emerged stronger in 2021 with a GDP 5.88% (-3.29% in 2020). Major economies also posted growth figures. Two of the largest economies – the United States and China reported 5.97% and 8.02% respectively while that of the United Kingdom was 6.76%, when compared with the 2020 figures of the three countries (United States: - 3.40%, China 2.35% and United Kingdom: -9.40%)
The Nigerian Government, in a bid to diversify its revenue sources and increase the income from tax, passed the Finance Act 2021 into law. A cardinal part of this law was the increase of Value Added Tax from 5% to 7.5%.
GROSS DOMESTIC PRODUCT
After coming out of the second recession by Q4, 2020, the economy recorded positive growth in the Quarterly Gross Domestic Product rates in 2021. The National Bureau of Statistics reported a GDP of 3.4% for the year. Q1 growth rate was 0.5% which improved to 5.01% in Q2. In Q3, there was a slight drop to 4.03% before the last Quarter closed the year with 3.98%. The Q4 2021 rate was higher than the 0.11% recorded during the corresponding period in 2020. As at Q4 2021, the growth recorded in the GDP was attributed to significant contributions from the non-oil sector of the economy. While the growth in the oil sector was -8.06%, the non-oil sector driven mainly by Agriculture, Trade, Information and Communication, Finance and Insurance recorded 4.73%.
The Exchange Rate of the Nigerian Naira NGN to other major currencies depreciated in 2021. USD $, the major currency which exchanged for $1:N379.50 on the last trading day of 2020 closed year 2021 with $1:N412.99. Measures taken by the Central Bank of Nigeria (CBN) including the stoppage of forex sales to Bureau De Change (BDC) operators continued to exert pressure on the NGN as supply of forex remained limited due to diminished foreign investments and Diaspora inflows. The gap between the official exchange rate and that of the parallel market has thus widened to as much as N145, an all-time high (the volatile parallel market rate got to N575 in 2021 and now above N630). In the downstream sector of the Petroleum industry, there has been relief for motorists and other consumers of Premium Motor Spirit otherwise known as petrol. The subsidy regime remained in place with price stability at
N165 per litre. Conversely, the price of Automotive Gas Oil (AGO or Diesel) which industries and other organisations depend heavily on to power their operations has remained high and recently hit the roofs. From just under N300 per litre in 2021, the price went as high as N800 in recent times.
NIGERIAN INSURANCE ENVIRONMENT
The Nigerian operating environment of the insurance sector in 2021 marked a remarkable departure from the preceding year which was an offshoot of several months of the pandemic-induced lockdown and thereafter the #End-SARS protests. However, the insurance sector cannot be separated from the larger economy where inflation rate remained high and only dropped marginally to 15.63% in December from 17.03% in January of 2021. Single digit rate remains a far cry and this has continued to have serious impact on the disposable incomes of the insuring public.
The insurance industry was able to grow its premium to N630 billion in 2021 from the N513 billion recorded in 2020. This is a 65% growth over a five-year period as the premium income for the entire industry was N380 billion in 2016. The target premium income of N1 trillion based on projections by the regulator – National Insurance Commission (NAICOM) is yet to be attained as several initiatives to deepen insurance penetration are yet to yield the desired results. Meanwhile, the policy on recapitalization of companies was on hold during the year though there are indications of a resort to the earlier suspended Risk-Based Capital model.
RESULT FOR THE YEAR
You will recall that at the beginning of this my report, I stated that our company recorded some modest improvement despite the harsh economic environment we operate in. The Gross Premium written increased from N3,949,079,000 in 2020 to N4,677,009,000 in 2021 which was an improvement of 18.4%. The Gross Premium Earned increased from N4,097,311,000 in 2020 to N4,646,308,000 in 2021 with a positive variance of 13.40%. The Profit Before Tax (PBT) recorded a significant growth of 108.7% from N214,476,000 in 2020 to N447,542,000
in 2021. The Profit After Tax (PAT) for 2021` was N377,370,000 compared with N197,489,000 attained in 2020. However, the Investment Income declined by 40.30% comparing the N161,312,000 figure of 2021 with N270,329,000 earned in 2020. The Net Assets increased from N4,983,869,000 in 2020 to N5,405,871,000 in 2021 with a positive variance of 8.47%.
The effects of the pandemic are still prevalent locally and internationally, mostly affecting the way operations are conducted. Your Company is also leveraging on technology to improve market penetration, processes and efficiency in service delivery. The rising inflation, insecurity, climate change, Russia-Ukraine war, hike in fuel pump prices, unstable labour
market, new waves of covid-19 among other challenges are what to confront in 2022. However, with the full opening of the global economic activities to the pre-pandemic levels, we are set for a remarkable improvement in our performances.
In closing, my deep appreciation goes to my colleagues on the Board for their policy guidance and the entire Management and Staff ably led by our committed Managing Director, Dr. Fatai Lawal for their hard work and determination to ensure continuing growth and profitability. Our gratitude and thanks go to our esteemed Regulators, Insurance Brokers, Auditors, Agents and clients who are the bedrock of our operations and improvements yearly. I continue to enjoin shareholders to have abiding faith in the company as their investment is secure and valuable.
Thank you all.