Royal Exchange earnings fail to hold front against rising expenses

In its 9 months of financial year 2019, Royal Exchange Plc did not make as much to cover its direct cost and operating expenses, and this resulted to pretax loss.

The financial service group share price has declined 16.67% year to date according to stock market data.

Share price peaked at 39 kobo in the financial year 2019, clocked its lowest value of 20 kobo, incidentally the current trading price at the floor of Nigerian Stock Exchange.

Trading with ROYALEX ticker, the stock market currently price the group at N1.029 billion on 5, 145, 370, 074 outstanding shares trading at 20 kobo.

Gross premium written by the group hits N12.697 billion from the beginning of the year to date. This represent about 3% decline when compare to N13.037 billion made in the comparable period in 2018.

The group gross premium was adjusted from unearned premium that settled at N1.648 billion at the end of 9 months in 2019 financial year, as against N1.856 billion in the comparable period.

This settled the group gross premium income at N11.049 billion in the period, compare to N11.181 billion that the group raked in last year.

However, the group which has interest in general insurance, assurance services, finance and assets management, healthcare and microfinance bank slipped to loss zone as revealed by its financial statement for the 9 months in 2019.

It was however observed that in line with declined activities, reinsurance expenses tailed off from N4.271 billion to N4.130 billion.

This settled net premium income at N6.918 billion, which weighed few “bucks” above N6.909 billion reported in the comparable period in 2018.

It was noted in the result that compare with last year position, Royal Exchange earned lower fee and commission income. Notably, this income line dropped off by about half between the periods.

Issuance claims and benefits incurred declined from N4.552 billion to N3.297 billion, this represents about 28% year on year decline. However, from the claims settled, some parts were recoverable from reinsurance services.

In the period, Royal Exchange N540.1 million from claimed and benefits paid to clients from reinsurance activities as against N1.724 billion.

At the end of 9 months period, the group made N337.435 million as fee and commission compare to N668.664 million a year before.

The group bottom line was also hit by increased cost of underwriting services. It surged from N2.832 billion last year to N3.161 billion at the end of 9 months in financial year 2019.

The financial service firm dipped into loss position. From profit level of N163.51 million in September 2018, the group made total loss of N72.881 million, as it operational activities burned value.

Its shareholders fund also nosedived to N4.975 billion at the end of the period, from N5.099 billion in the comparable period in 2018.

From the beginning of financial year 2019, Royal Exchange total assets declined by about 20% as it pitched at N28.517 billion.

At the beginning of the financial year 2019, Royal Exchange total assets carrying value was N35.516 billion.

Analysis of the group numbers however revealed that Royal Exchange Plc halved the value of its short term deposits, demand and time deposits to meet its immediate cash needs.

The fair value of the short term instruments declined from N15.045 billion to N7.309 billion in the period.

Overall, the group result shows that Royal Exchange made N2.024 billion in net income, but value was significantly taken away as it expensed N2.09 billion on its operational activities.

Meanwhile in the comparable period in 2018, the group made N3.017 billion while its operational expenses for the period was N2.584 billion, which resulted to profit in the sum of N153.51 million.

Net claim expenses were moderated by about 3% in relation to underwriting income; it declined from N2.828 billion to N2.757 billion.

This was in line with reduced underwriting activities valued at N7.578 billion in September 2018 as against N7.256 billion recorded in 2019.

The bottom line weakened to net loss of N96.202 million, coming from profit after tax of N111.187 million in the comparable period in 2018.


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