Veritas Kapital Assurance Plc has recorded a remarkable 211% year-on-year (YoY) increase in insurance revenue, reaching ₦22.11 billion for the full year 2024. However, despite exceptional premium growth, the company saw a sharp decline in profitability, with Earnings Per Share (EPS) dropping to -0.02 kobo from 0.40 kobo in 2023.
The company’s unaudited financial statements for the year ended December 31, 2024, highlight impressive top-line expansion but also rising reinsurance costs and higher insurance service expenses, which severely impacted profitability.
Key Financial Highlights (2024 vs. 2023)
- Gross Premium Written: ₦23.69 billion (2023: ₦7.30 billion) ↑225%
- Insurance Revenue: ₦22.11 billion (2023: ₦7.10 billion) ↑211%
- Insurance Service Expenses: ₦15.99 billion (2023: ₦5.49 billion) ↑191%
- Insurance Service Result Before Reinsurance: ₦6.13 billion (2023: ₦1.62 billion) ↑279%
- Net Expenses from Reinsurance Contracts: ₦10.08 billion (2023: ₦1.83 billion) ↑450%
- Profit Before Tax (PBT): ₦213.69 million (2023: ₦2.98 billion) ↓93%
- Profit After Tax (PAT): ₦73.41 million (2023: ₦2.75 billion) ↓97%
- Basic Earnings Per Share (EPS): -0.02 kobo (2023: 0.40 kobo) ↓100%
Veritas Kapital Assurance achieved record-breaking revenue growth, but the significant increase in expenses and reinsurance costs erased its profit margins, leading to a sharp EPS decline.
Revenue Growth: Key Drivers
Veritas Kapital Assurance recorded an exceptional 211% increase in insurance revenue, driven by:
1. Significant Growth in Gross Premiums (+225%)
- Gross premium written surged to ₦23.69 billion as the company expanded its insurance offerings.
- Increased corporate and retail policy enrollments boosted revenue across general and life insurance segments.
2. Increased Market Penetration & Customer Base
- The company strengthened its distribution channels, leading to higher policy subscriptions.
- Expansion into new insurance segments, including digital and SME insurance products.
3. Higher Investment Income (+31.4%)
- Investment income grew to ₦2.47 billion (2023: ₦1.88 billion), supported by higher interest rates and improved asset allocation.
4. Foreign Exchange Gains Provided Some Relief
- The company recorded ₦5.09 billion in FX gains (2023: ₦3.50 billion), cushioning some of the impacts of rising costs.
Earnings Per Share (EPS) Decline: Key Factors
Despite the strong revenue growth, EPS declined to -0.02 kobo due to a combination of rising expenses and increased reinsurance costs:
1. Surging Reinsurance Costs (+450%)
- Net reinsurance expenses soared to ₦10.08 billion, compared to ₦1.83 billion in 2023.
- This suggests a more conservative risk strategy, but it also significantly reduced profit margins.
2. Higher Insurance Service Expenses (+191%)
- Insurance service expenses jumped to ₦15.99 billion, nearly tripling from 2023 levels.
- The sharp rise in claim payouts and policy management costs offset revenue gains.
3. Rising Operating Expenses (+50.8%)
- Operating expenses increased to ₦5.40 billion (2023: ₦3.58 billion), reflecting higher operational costs and inflationary pressures.
4. Reduced Net Profitability
- Profit before tax (PBT) dropped by 93% to ₦213.69 million, significantly limiting bottom-line growth.
- Profit after tax (PAT) plunged by 97% to ₦73.41 million, reducing the bank’s ability to generate shareholder returns.
Operational Highlights & Cost Management
Veritas Kapital Assurance faced profitability challenges despite its top-line expansion, driven by:
- Higher insurance service costs, which outpaced revenue growth.
- Rising reinsurance costs, which reduced net insurance earnings.
- Moderate growth in investment income, which helped offset some losses.
The company must now optimize expense management and risk assessment to restore profitability.
Balance Sheet & Capital Strength
Veritas Kapital Assurance maintained a strong balance sheet despite its profitability decline:
- Total Assets: ₦36.43 billion (2023: ₦24.68 billion) ↑47.7%
- Total Equity: ₦16.33 billion (2023: ₦16.37 billion) ↓0.24%
- Cash & Cash Equivalents: ₦10.38 billion (2023: ₦6.56 billion) ↑58.2%
- Insurance Contract Liabilities: ₦15.49 billion (2023: ₦4.54 billion) ↑241%
While total assets grew significantly, equity remained flat, indicating limited shareholder value growth.
Dividend & Shareholder Returns
- Total dividend paid dropped to ₦105.28 million (2023: ₦256.43 million), reflecting lower profitability.
- Dividend per share (DPS) cut by 59%, aligning with the bank’s need to preserve capital.
The company aims to restore dividend stability by improving cost management and profitability.
Macroeconomic & Industry Challenges
1. Inflation & Economic Pressures
- Nigeria’s inflation rate hit 34.8% in December 2024, increasing insurance claim costs.
- Rising consumer prices impacted affordability, leading to policyholder retention risks.
2. Foreign Exchange Volatility
- The naira depreciated to ₦1,533 per USD in January 2025, increasing imported reinsurance costs.
3. Insurance Industry Growth & Competition
- More players in the insurance sector have led to aggressive pricing and lower margins.
Strategic Priorities for 2025 & Beyond
Veritas Kapital Assurance aims to enhance profitability and improve EPS through:
1. Cost Optimization & Risk Assessment
- Reducing reliance on expensive reinsurance contracts.
- Enhancing claims processing efficiency to lower insurance service expenses.
2. Expanding Investment Income
- Increasing exposure to fixed-income securities to generate stable returns.
- Leveraging FX gains through currency hedging strategies.
3. Strengthening Digital Insurance Offerings
- Improving online insurance policy processing for operational efficiency.
- Expanding into mobile-based insurance solutions to reach more customers.
4. Market Expansion & Premium Growth
- Targeting underinsured segments in Nigeria, including SMEs and informal businesses.
- Enhancing policyholder engagement to improve retention rates.
Conclusion
Veritas Kapital Assurance Plc delivered record revenue growth in 2024, but rising costs and reinsurance expenses significantly eroded profitability.
- Insurance revenue surged 211% to ₦22.11 billion, reflecting strong premium growth.
- EPS fell to -0.02 kobo, as profitability declined by 97% due to surging costs.
- Net reinsurance costs soared 450%, reducing the company’s profit margins.
- Total assets increased 47.7%, indicating business expansion despite challenges.
- Dividend payout declined, reflecting lower earnings capacity.
Moving forward, Veritas Kapital Assurance must prioritize cost optimization and risk management to restore profitability and enhance shareholder value.
