United Overseas Insurance (UOI) – the insurance arm of the United Overseas Bank (UOB) - has posted earnings of $11.6 million in 1HFY21 ended June, up 35.4% from the $8.6 million logged in the year before.
On a fully diluted basis, this translates to earnings per share (EPS) of 37.91 cents, up 35.4% from the 28 cents seen in 1HFY20.
With this, UOI’s net asset value per share stood at $7.26 in 1HFY21, compared to $6.94 in the previous year.
The stronger performance in 1HFY21 follows a $0.7 million or 1.2% increase in gross premium to $57.2 million. Increments were seen in all classes of insurance except for other accident and marine.
There was a corresponding 0.2% increase in the net earned premium to $19 million, while the net claims incurred was down by 0.6%. Similarly, net commission income was down by $0.9 million due to lower profit commission recoverable from reinsurers in the current period.
Management’s expenses were up by 8.5% to $7.1 million in 1HFY21 due to expenses and depreciation from a recently acquired property as well as a smaller amount of funds received from the government’s Jobs Support Scheme (JSS) compared to the year before.
As such, underwriting profit was down by 14.4% to $8.2 million.
Overall, profit after tax was up 35.4% to $11.6 million, following an increase in non-underwriting income to $5.6 million. The jump is mainly due to exchange gains and higher dividend income.
Net of tax, other comprehensive income – which affects the group’s balance sheet and not its after-tax profit – recorded an unrealised gain of $15.6 million instead of an unrealised loss of $11.5 million as was seen in 1HFY20.
This was due mainly to the rebound of global financial markets and healthy returns from the equity markets offset by some losses in the fixed income markets, UOI explains in its results filing.
As at June 30, UOI’s cash and cash equivalents stood at $45 million, down from $53.7 million in the previous year.
Looking ahead, the company acknowledges that premium growth remains challenging in view of the heightened uncertainties in the economic environment.
The claims experience for one is expected to continue being under pressure given the prevailing adverse business conditions and severe weather conditions brought about by climate change.
Even so, UOI says “underwriting profit is expected to remain at a satisfactory level due to [its] judicious underwriting prudence, new cross-selling initiatives with [UOB] and business development efforts with insurance intermediaries”.
The company is also focused on achieving reasonable returns while managing the risks and volatility associated with its investment portfolio.
Shares in UOI closed down 2 cents or 0.28% on July 29, before its results announcement.
