Growth was recorded in the non-oil sector towards the last quarter of 2020 due to increased activity in some sectors like the Information and Communications Industry, Covid-19 brought about a new normal operating environment because of increase in online/virtual means of doing business as a way of complying with the protocols of social distancing.
The agricultural sector recorded some boost especially during the period that our land borders were closed. This encouraged production of grains locally as against the uncontrolled importation of all manners of grain into the country. Although the land borders have been partially reopened but the country is still having food security challenges because of the incessant farmer-herdsmen clashes. Kidnapping and banditry also have their toll on the economy and social lives. The industrial sector recorded a nominal growth of 1.95% by last quarter of 2020. The power sector is still a challenge to industrial growth due to high electricity tariff.
NIGERIAN OPERATING ENVIRONMENT
Many factors impacted on the operating environment in 2020 apart from the lockdown caused by Covid-19 pandemic. These include fall in crude oil prices as well as fall in demand, fluctuation in exchange rate and the depletion of the foreign reserve of the country.
There is continuous widening of gap between the official exchange rate of the naira and the major foreign currency, the USD even as the government devalued the naira twice in 2020. First in Mach 2020 by adjusting the rate from N307 : $1 to N360 : $1 and later to N381 : $1 at the beginning of the third quarter. The parallel market was even as high as N450 : $1 during the period.
GROSS DOMESTIC PRODUCT
Going by the report of National Bureau of Statistics (NBS) the Finance and Insurance sector's contribution to real GDP in 2020 was 3.24% which was slightly higher than that of the proceeding year which was 3.01%. However, while the GDP of Financial sector grew to 2.41% in full year 2020 from 2.4% in 2019, the GDP of the Insurance sector was 0.32% in 2020 as against 0.59% in 2019. In all, the GDP value of Nigeria represents 4.5% of the world economy and is ranked 27th on the Global nominal GDP.
According to National Bureau of Statistics data, the 12.13% inflation rate in January 2020 rose to 15.75% in December of the same year. This growth which was highest in the last three years was attributed to steep rise in the food index by 19.56% when compared with that of the previous month which was 18.3%.
The operating environment was fueled by activities of operators geared towards meeting the recapitalization limits set by the industry regulator (NAICOM) the previous year. The regulator after cancelling the Tier-Based Minimum Solvency Capital introduced a two-phased recapitalization program wherein 50% of the minimum paid up share capital must be met by 31st December 2020 and balance the following year. The proposed new capital is as shown below:
||Previous Capital (N'000,000)
||New Capital (N'000,000)
Initial measures taken by some operators led to the injection of additional capital by foreign investors while mergers and acquisition and re-capitalisation processes were embarked upon by some other operators before the exercise came to a halt following a December 21, 2020 Court Injunction by the Federal High Court, Lagos.
The court action was initiated by a group of shareholders to restrain the National Insurance Commission (NAICOM) from continuing with the recapitalization exercise.
RESULT FOR THE YEAR
As stated earlier, the economy experienced some turbulence during the financial year 2020. However, your company recorded some improvement in some aspects of its operations.
The Gross Premium written increased from N3,885,447,000 in 2019 to N3,949,079,000 in 2020 giving a marginal improvement of 1.64%. The Gross Premium Earned increased from N3,945,341,000 in 2019 to N4,097,311,000 in 2020 with a positive variance of 3.85%. The Profit Before Tax (PBT) suffered a reduction of 61.02% from N550,230,000 realised in 2019 compared with N214,476,000
The Profit After Tax (PAT) decreased from N505,181,000 in 2019 to N197,489,000 in 2020 with a negative variance at -60.91% due to high incidents of Claims. The Gross Claim Expenses in 2019 of N1,425,235,000 increased to N1,829,098,000 in 2020.
The investment income recorded an improvement of 5.38% from N256,521,000 earned in 2019 as against N270,329.000 earned in 2020. The Net Assets increased from N4,849,891,000 in 2019 to N4,983,869,000 in 2020 with a positive variance of 14.65%.
Although the effect of Covid-19 is still very much with us but with business operations now getting better and the impact of the global pandemic gradually reducing, there is hope of further improvement in our performance in the years ahead.
Although the naira devaluation has its effect on business operations, a more conducive business environment, increase in capital and improvement in business drive will yield better performance in the nearest future.
2020was a rather tough year. I want to use this opportunity to thank my Board colleagues and the entire management and staff for their hard work and dedication which enabled us to keep our heads above water throughout.
I also thank our business partners, our valued brokers, reinsurers, agents, bankers, our professional advisers and numerous clients for their confidence in us.
In conclusion I appreciate the resilience of my fellow shareholders who have kept faith over the years and have been most supportive to the company.
Thank you all.