Custodian and Allied Insurance spur growth with merger synergies

Background

Custodian and Allied Insurance Plc (CAI), is a general insurance business. The principal activities of the Company are to develop, package and deliver insurance products within the areas of Personal cover, Business cover and Special Risk.

Personal cover provides insurance services such as Vehicle, Homeowners, Accident and Boat owner/Yacht insurances. Business cover offers insurance services such as Business Interruption, Burglary/Housebreaking, Electronic Equipment Insurance, Employee Dishonesty (Fidelity Guarantee), Marine Hull, Marine Cargo, and Plant All Risks insurances. Special Risk provides insurance services such as Oil/Gas, Directors & Officers Liability, Credit Card Protection, Aviation and Debit Card Protection insurances. The Company’s subsidiary is CAI Trustees Limited.

The company has 5.88 million shares outstanding with a shareholders fund of N19.52 billion as at December 31 2013.

Custodian and Allied Plc, ranked second among insurance companies to release their 2013FY recorded as a stellar good performance both at top line and bottom line level.

For the year ended December 2013, the Nigeria insurer spiked gross premium written by 366.05 percent year on year YOY to N22.96 billion from N4.7 billion for the same period in the prior year (FY12).

Gross premium income in the review period surged by 292 percent y/y to N18.79 billion compared to N4.79 billion as at 2013FY.

Net premium income rose by 122.48 percent to N8.41 billion in FY13 as against N3.78 billion as at FY12.

The fantastic results are attributable to the superb contributions of Custodian and Allied Plc and its four the holding subsidiaries–Custodian and Allied Insurance Ltd, Custodian Life Assurance Ltd, Crusader Sterling Pensions Ltd and Custodian Trustees Ltd.

The four companies have been able to intertwine effectively and also contributed unrelentingly to the growth trajectory of their parent company.

Investment income and operating income increased by 125.11 percent to N3.47 billion in 12M13 from N1.54 billion in 12M12.

Profit before tax (PBT) for the year ended December 2013 climbed by 106.98 percent to N4.33 billion from N2.09 billion in 2012- backed by increase in operating and investment income.

Pre-tax profits should have been more but was slowed by a 938.1 percent spike in re-insurance expenses to N10.38 billion in 2013.

Profits after tax (PAT) rose by 151.57 percent y/y to N3.60 billion compared to N1.43 billion as at 2013FY.

Underwriting expenses were up by 175.21 percent y/y to N2.21 billion in 2013 compared to N803.12 million in 2012, while non claim expenses increased to by 214 percent to N4.53 billion in 2013.

Operating expenses grew by 62.56 percent y/y to N5.80 billion in FY13 compared to N3.57 billion in 2012.

The company is aggressively expanding its asset base as total assets in the review period jumped by 117.69 percent y/y to N45.65 percent as against N20.97 percent in 2012.

The growth in asset base was fuelled by a 1322 percent surge in re-insurance assets to N11.04 billion in FY13 from N776.1 million as at FY12.

The insurer have raised a huge amount over the par value of shares issued as share premium account increased by 128 percent to N6.40 billion in 2013 from N2.80 billion in 2012.

It means that the company can pay its equity related expenses such as underwriting expenses and also issue bonus shares to shareholders.

The insurer’s tenacious ability impressively grow profits have help swell reserves as retained earnings in FY13 spurt by 327.97 percent to N4.10 billion from N958 million in 2012.

This implies that Custodian and Allied have funds to re-invest in core business, pay dividend to shareholders and also pay debt.

The Return on Average Equity ROaE climbed to 18.84 percent from 14.87 percent for FY 2012, while Return on Average Assets ROaA rose to 7.8 percent from 6.82 percent for FY 2012.

 Share performance and Outlook

The share price of Custodian and Allied has increased by 26.81 percent in the past one year to close at N2.2-April 10th 2014 on the floor of the Nigeria Stock Exchange.

The insurer has a market capitalization of N12.94 billion on the same day.

The company declared a final dividend of 11k/share (implied yield of 5.37 percent on the N2.05k price/share as at the time of the result release) after it had earlier declared 5k/share to bring the total dividend to 16k/share.

BALA AUGIE