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Economy

AIICO Boosts GWP by 12.2% as Profit Dips 17.6% in Q1’21

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AIICO Insurance

By Adedapo Adesanya

Leading insurance company, AIICO Insurance Plc, recorded a 12.2 per cent growth in its Gross Written Premium (GWP) to N19.7 billion in the first quarter of 2021 from N17.6 billion recorded in the corresponding quarter of 2020.

According to the company, the increase was due to a year-on-year rise of 34.0 per cent in the general insurance business (35.7 per cent of gross written premiums) to N7.0 billion as against N4.6 billion recorded in Q1 2020.

However, the profit after tax declined by 17.6 per cent year-on-year to N1.5 billion in the first quarter of 2021 from N1.9 billion in the first three months of last year.

It was observed that the profit before tax increased by 11.3 per cent year-on-year to N1.6 billion in Q1 2021 from N1.4 billion in Q1 2020 on the back of improved overall profitability in the insurance businesses (Life, General and HMO).

AIICO revealed that it recorded an underwriting profit of N27.7 billion in Q1 2021 compared to the N131.0 million loss posted in Q1, noting that it was attached to changes in sovereign bond yields, which impacted the value of the company’s liabilities and assets.

In the life business, the firm explained that it was typically concerned about whether there is a surplus or deficit of assets over liabilities because of these movements. However, because of limitations in financial reporting, changes in liabilities affect underwriting profits while changes in assets are reported below underwriting profits.

“The effect is the significant variation in underwriting profits especially in volatile investment yield environments, such as we have in Nigeria. During Q1 2021, annualized yields rose by 430 basis points to 11.7 per cent at the long end of the yield curve, leading to a reduction in the fair values of assets and liabilities; the reduction in liabilities led to positive underwriting profit while the reduction in assets is reflected in the fair value losses for the period,” it said.

According to the firm, the total investment income declined to a loss of N24.1 billion in Q1 2021 compared to N4.7 billion in the same period of last year. This came as the federal government’s bond yields rose, affecting the fair value of the company’s financial assets. FGN bonds make up most of AIICO’s investment portfolio.

It was revealed that profits in its wealth management business declined in Q1 2021 as capital markets turned bearish during the quarter.

Total assets declined by 11.1 per cent to N216.2 billion in Q1 2021 as against N243.1 billion in the preceding year driven by a reduction in financial assets (-9.3 per cent; 79.0 per cent of total assets) and cash and cash equivalents (-38.2 per cent; 9.1 per cent of total assets).

Total liabilities declined by 13.4 per cent to N180.6 billion in the review period as against N208.4 billion recorded in the full year 2020. This was driven mainly by a decline in insurance contract liabilities (-15.9 per cent) from the rise in yields and reserving for new business and fixed income liabilities (-9.5 per cent) in its asset management business.

Total equity increased by 2.8 per cent to N35.6 billion in Q1 2021 from N34.7 billion recorded in the whole of 2020.

Commenting on the results, the Managing Director and Chief Executive Officer (CEO), Mr Babatunde Fajemirokun, said, “The world is in a difficult moment and Nigeria has not been spared.

“Even as the world starts to move on from the pandemic, the economic after-effects will reverberate for a while yet. However, there is some reason for optimism – economic activities have improved, and the country will likely exit the recession. Oil prices remain elevated, and the pandemic-induced lockdowns are easing all over the world.

“We made significant strides in 2020: implementing our business continuity plan and leveraging technology to improve processes and get closer to our customers. Building on this, we recorded premium growth of 12.2 per cent year-on-year to N19.7 billion in Q1 2021. Our financial position remains resilient as well – shareholders’ funds increased 3.3 per cent year-to-date to N34.8 billion.

“Nonetheless, we remain optimistic that economic activities will continue to rebound in coming periods, the IMF has revised its economic growth forecasts for Nigeria upward to 2.5 per cent from 1.5 per cent.

“Insurance, like every other sector, will have its role to play in the economic recovery as enablers of economic growth by assuming risks that encourage long-term direct investment which enhances production and job creation. Our robust financial position ensures that we can meet our obligations when they arise.”

AIICO Insurance is a leading composite insurer in Nigeria with a record of serving our customers that dates back over 50 years. Founded in 1963, AIICO provides life and health insurance, general insurance and investment management services to create and protect wealth for individuals, families and corporate customers.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

Economy

FG Raises N130bn from Sukuk Sales for Road Infrastructure

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Sukuk road infrastructure

By Aduragbemi Omiyale

A total of N130 billion has been raised from the sale of Sukuk for the construction and rehabilitation of road infrastructure across the country.

Business Post reports that on November 21, 2022, the Debt Management Office (DMO) opened for subscription N100 billion Sovereign Al ’Ijarah Sukuk.

However, because of the strong appetite shown by the diverse investors, the size of the offer was increased to N130 billion.

According to a statement issued by the DMO, the exercise recorded over 165 per cent subscription level.

The agency described this as “evidence of investors’ confidence in the use and impact of Sukuk in the construction and rehabilitation of road infrastructure across the country.”

It stated that offers were received for the debt instrument, sold at a rental rate of 15.64 per cent per annum, from retail investors, banks, pension fund administrators, assets/fund managers, insurances companies, ethical funds, Takaful operators/non-interest banks, stockbrokers, government agencies, high net worth individuals, trustees and unit trusts.

The DMO assured subscribers of the Sukuk that “the proceeds of the 2022 Sovereign Sukuk, like the previous Sukuk issue proceeds, will be used solely for the construction and rehabilitation of key road projects through the Federal Ministry of Works and Housing and the Federal Capital Territory Administration.”

It thanked the investors for supporting the federal government’s infrastructure development efforts through Sukuk financing.

“The strong participation of retail investors, ethical funds and non-interest financial institutions in this Sukuk offering attest to the fact that the Government’s objective of promoting financial inclusion through admitting more retail investors and ethical funds into the financial system is being achieved,” it stated.

The debt office promised to “work to sustain the laudable achievements recorded so far in the use of Sukuk issue proceeds for the construction and rehabilitation of Nigerian roads, and thereby, continue to enhance ease of commuting and doing business, safety on our roads, job creation, economic growth, and prosperity of our nation.”

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Economy

Nigeria Sells Retail Bonds for 13.26% at N1,000 Per Unit

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FGN Retail Bonds

By Modupe Gbadeyanka

The Debt Management Office (DMO) has commenced the sale of the Federal Government of Nigeria (FGN) savings bonds for December 2022.

The retail bonds are sold monthly to low-income earners and other interested investors as a way to raise funds from the capital market to finance budget deficits.

For this month’s sale, the debt office is offering the papers in the usual 2-year tenor and 3-year tenor at a coupon rate of 12.255 per cent and 13,255 per cent per annum, respectively.

Subscriptions for the notes started on Monday, December 5, 2022, and will close on Friday, December 9, 2022, according to details of the exercise released by the DMO.

The interest would be paid to subscribers quarterly, i.e., March 14, June 14, September 14, and December 14, while the bullet repayment would be made at the maturity date.

The savings bond is sold at N1,000 per unit, and investors are required to purchase at least N5,000 and a maximum of N50 million.

Intending investors would be expected to contact their brokerage companies on how to purchase the debt instrument.

The retail bonds are backed by the full faith and credit of the Nigerian government and are charged upon the general assets of the country.

The investment tool qualifies as a security in which trustees can invest under the Trustee Investment Act.

It is also a liquid asset for liquidity ratio calculation for banks and qualifies as government securities within the meaning of the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for tax exemption for pension funds, amongst other investors.

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Economy

New Cash Withdrawal Limits Will Expose Tax Evaders—Oyedele

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expose tax evaders

By Adedapo Adesanya

The Fiscal Policy Partner and African Tax Leader at one of the country’s leading consultancy companies, PwC, Mr Taiwo Oyedele, has said the new cash withdrawal limits introduced by the Central Bank of Nigeria (CBN) would expose tax evaders, individuals and micro, small, and medium enterprises (MSMEs) in Nigeria.

In a series of tweets seen by Business Post, the tax maverick said that with the restrictions placed on cash withdrawals, many people would be forced to carry out transactions using electronic payments, and small businesses that currently operate mostly on cash would become visible to the tax authorities.

It had been reported the apex bank on Tuesday moved to limit the amount of cash withdrawals Nigerians can make with benchmarks placed at several channels, including over-the-counter, point of sales (POS), and automated teller machines (ATMs).

He explained that the policy would trigger various tax obligations, including income tax, value-added tax (VAT), and Pay-As-You-Earn for small businesses and individuals.

On Income tax, he wrote that “If your business is registered as a company, you may be liable to CIT depending on your annual turnover (i.e. no CIT if your turnover below N25 million, 20 per cent if your turnover is between N25 million to N100 million 30 per cent if your turnover is more than N100m) in addition to Education Tax at 2.5 per cent.

“If your business is not registered as a company, then you will be liable to personal income tax based on graduated taxable income bands between 7 per cent and 24 per cent.”

On VAT, he explained that, “All businesses are required to register for VAT and charge 7.5 per cent on their goods and services except those with annual turnover below N25 million.”

For PAYE, Mr Oyedele explained that employees earning more than N30,000 per month are liable to PAYE, which must be deducted and paid to the tax authority by the employer on a monthly basis.

To this, he noted, “You may also be liable to other statutory contributions such as pension depending on your staff strength.”

For individuals, he noted that as they carry out more transactions, this will make them susceptible to transparency as it will make it easier for the government to track those who are tax evaders.

“The more transactions you make electronically, the more the tax authorities will get the intelligence to track your income and net worth, making it easier to fish you out if you are a tax evader.”

He then advised small business owners to register with relevant tax authorities like the Federal Inland Revenue Services (FIRS) and the state internal revenue services where they operate.

Further, the PwC official called on SME operators to open a separate bank account for their business, “or dedicate one for that purpose if you already have a business account) and don’t mix business with personal transactions.”

The government, on its part, he said, needs to sensitise the general public, especially small business owners, adding that the CBN should ensure a proper handshake with the fiscal authorities.

“For instance, the conditions for excess cash withdrawals could include Tax Identification Number,” he opined.

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