Cornerstone Insurance reports almost threefold jump in half-year profit

Cornerstone Insurance recorded nearly thrice as much as the net profit it reported in the first half of 2023 in the same period of this year as the bottom line derived a substantial boost from foreign exchange, its newly issued financial report shows.

Shares in the company advanced significantly in early trading on the Nigerian Exchange, already 9.9 per cent up as of 11:09 West Africa Time. The maximum daily price appreciation allowed by the stock exchange is 10 per cent.

Insurance revenue, the main income source of the underwriter, climbed 75.5 per cent to N16.9 billion.

But it was on the net gain from foreign exchange, which more than doubled to N27.6 billion, that the strong performance was anchored, suggesting that other sectors within financial services apart from banking are also benefitting from the advantage that companies with assets in foreign currencies are reaping from the devaluation of the naira.

Two devaluation rounds between June last year and this January caused the rate of exchanging the naira for a dollar to rise sharply, allowing Nigerian companies holding investments that are denominated in foreign currencies to earn big income after such assets are converted into naira.

In the period under review, net finance expenses from insurance contracts issued fell to N273.9 million from N1.1 billion a year earlier. The insurer did not provide a reason for the huge drop in the notes accompanying the earnings report.

Cornerstone Insurance’s profit before tax increased by 107.3 per cent to N9.8 billion. The company incurred a lower income tax of N1.1 billion, compared to N4.2 billion in the same period of last year, helping reduce the impact of cost pressure on after-tax profit.

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Early this month, the firm agreed at its annual general meeting to pay shareholders a total dividend of N2.9 billion for the financial year 2023, translating to N0.16 per unit. That compares to the N1.1 billion it paid for 2022.

The stock has appreciated by 80.7 per cent so far this year, outperforming the NGX Insurance Index, the sector index tracking the performance of top insurance companies by market value and liquidity, which has yielded 30 per cent.