Custodian Plc.’s Capital Position Keeps Insurer on Track
Custodian Plc

Custodian Plc.’s Capital Position Keeps Insurer on Track

Custodian Investment Plc, a company formed after a successful merger of Custodian and Allied Insurance Plc and Crusader Plc made a relatively large income in the first half of 2022, according to a financial statement submitted with regulators.

Though, profit growth was weak due to its rising costs profile partly driven upward by aggressive marketing operations and associated expenses. In the period, the company’s profit sit at N4.722 billion, up by 1.28% year on year at a time when the naira has lost significant value against the United States dollar. 

Trading at N6.65 per share in the local bourse, Gratitude Capital Limited is the company’s single largest shareholder with a 22.48% stake out of 5.881 billion shares outstanding.

Also, MIKEADE Investment has to its name a 15.72% of the shares outstanding while Custodian directors held 6.06% in the company – more than 4% this belongs to Wole Oshin – Custodian Plc.’s Chief Executive. Its unaudited financials show that earnings per share declined to 78 kobo from 82 kobo 12-month ago due to a series of margin-dilutive developments that occurred in the operations.

What happened was the management expenses rose 8.46% to N4.873 billion at the time when the company kept a tab on its previous bloated finance costs – down by 75% from N368.058 million to N93.845 million. READ: Custodian Investment Rated Buy despite Weak Profit, Soft Upside

The surge in management expenses was propelled by staff costs which jumped to N1.909 billion in the first half of 2022, from N1.834 billion a year ago.  In addition to that, Custodian Plc’s marketing and administrative expenses rose to N1.429 billion amidst rising inflation, up 20% from N1.187 billion.

Also, the company’s net income declined sharply, while its net fair value losses improved, driven by changes in the market value of its financial assets and net unrealised gain from its foreign exchange position.

Management reported that there was an improvement in asset position as impairment allowance slowed down to N19.671 million from N101.248 million 12-month ago. Custodian Plc’s investment in associates failed to contribute to the company’s earnings performance in the first half of 2022. Actually, its associates’ performance costs the company N758.447 million, thus reducing its profitability margin.

In addition, a decision to discontinue operation cost the company N28.287 million in the first half, a bit higher than N29.316 reported in the comparable period in 2021.

With about N43 billion capital base, comprising its issue capital, premium and retain earnings, Custodian Investment has continued to stay strong amidst National Insurance Commission (NAICOM) recapitalisation requirement. The insurance sector repositioning, despite being halted, could see more operators shutting down, according to the industry regulator.

In the first half earnings report, Custodian Plc delivered N48.497 billion as group gross revenue in the financial year 2022, up 14.95% from N42.188 billion in the comparable period last year.

Analysis of the numbers shows that the company’s earnings outturn in the first half of the year was driven by growth from its core business segments. Despite Custodian’s double-digit growth in the top line, the group profitability only rises minuscule for its size. 

Unaudited financial statement submitted to the regulators shows that profit printed at N4.722 billion, up 1.92% from N4.633 billion reported in the comparable period in 2021.

In the stock market, Custodian Plc was valued at N38.232 billion on 5.881 billion shares outstanding amidst the industry’s repositioning efforts.  MarketForces Africa reported that NAICOM said more insurance companies will be shut down following plans to reposition the industry.

In the first half of 2022, MarketForces Africa noted that Custodian Plc’s capital base comprised share capital –N2.940 billion, share premium- N6.412 billion and retained earnings –N33.505 billion. For recapitalisation demand, these allowable shareholders’ fund line items summed up to N42.857 billion in the first half from NGN40.97 billion in 2021.

Thus, staying above the proposed regulatory benchmark of N18 billion for a composite class of business. The company’s unaudited financial statement shows that net income fell sharply, from N29.554 billion reported in the first half of 2021 to N11.430 billion. The insurance company’s gross written premium in the first half settled at N47.302 billion, an increase of 16.33% above N40.662 billion.

Year to date, operating expenses inched upward significantly amidst Nigeria’s rising inflation rate. The report shows that Custodian Plc reported a threefold increase in operating cost, from N12.653 billion to N37.067 billion in 12-month.

This was a result of higher claim-related expenses as well as a change in provision for outstanding claims and Life Fund estimate. Its financials show that claims expenses surged by 29.4% to N10.478 billion in the first half of 2022, influenced by huge claims payout from the life business during the period, and 11.28% jump in underwriting expenses to n2.742 billion.

Custodian Investment Plc has a controlling interest of 76.55% in CrusaderSterling Pensions Limited, which gives rise to non-controlling interest of 23.45% in the entity. Also, the group has a 51% controlling interest in UPDC Plc giving rise to a non-controlling interest of 49%.

Custodian Investment Plc. is the investment holding company that resulted from the successful merger of Custodian and Allied Insurance Plc and Crusader (Nigeria) Plc. Custodian Investment Plc was incorporated on 22 August 1991 as a private limited liability company under the name Accident and General Insurance Company Limited.

It changed its name to Custodian and Allied Insurance Plc on 5 February 1993, became a public limited liability company on 29 September 2006 and later changed its name to Custodian Investment Plc on 24 May 2018.