Company Analysis

Cornerstone Insurance: Back To Profit, But Remaining There Is Key

Rating: Hold

Current Market Price: N0.50
Year High: N0.75
Year Low: N0.50
Fair Value: N0.11
Equity Analyst:  Tunde Segun Jeariogbe


  • In this report, we have observed the three-month financials of Cornerstone Insurance Plc for the period ended 31st March 2020, compared the same to numbers representing the similar quarter of 2019 to make investment recommendations.
  • Within the compared periods, Cornerstone had no borrowings, as items stated under the liabilities column are all non-interest yielding. Observe that bank charges on accounts generated the Finance Cost reported through the period. Please understand that this has remained the style of Cornerstone Account for some years.
  • Meanwhile, against the lost position posted in the corresponding quarter, its 2020 first-quarter business session yielded a positive income as will be seen below.

Statement of Comprehensive Income

  • Gross Premium Written dropped marginally over that of the corresponding period by 4.56% to N4.57 billion from N4.79 billion.
  • Gross Premium Income improved to N3.30 billion, from the stated N3.00 billion in its 2019 first-quarter result.
  • Insurance Expenses grew by 20.85% to N1.87 billion, as against N1.55 billion in the corresponding quarter.
  • Net Premium is stated as N1.42 billion. This is 1.93% below N1.42 billion in the prior first quarter.
  • Underwriting Income is valued at N1.76 billion as against the N1.71 billion reported in the comparable quarter.
  • Claim Expenses through the first three months of the year was valued at N1.01 billion, 23.06% above the N825.28 million at the end of the 2019Q1.
  • Underwriting Expenses grew by a marginal 0.89% to N534.62 million, as against N520.02 million in the similar quarter.
  • Thus, Underwriting Profit at the end of the 2019Q1 operating period was N223.29 million, compared to the previous N370.76 million.
  • Investment Income for the three-month period was N305.62 million, lower than the N357.31 million reported 2019Q1.
  • We have therefore estimated insurance profit at N528.92 million, lower than the N728.08 million estimated in 2019
  • Operating Expenses dropped by a marginal 4.82% to N683.05 million, from N717.61 million in 2019.
  • Profit before Tax is currently estimated at N521.39 million, as against the loss before tax posted in 2019 first quarter.
  • After taking care of the Tax Expenses, management reported a net profit of N475.11 million for the quarter, compared to the loss after tax of N98.37 million in the 2019Q1.

Statement of Financial Position

  • At the end of the 2020 first quarter, Cornerstone’s Total Assets was valued at N36.13 billion, 9.84% better than the N32.89 billion reported at the end of the 2019 first quarter business session.
  • Total Liabilities was estimated at N21.01 billion, versus N22.32 billion in the comparable quarter.
  • Properties Plant and Equipment investment improved by 5.39% to N2.18 billion, which is above the N2.07 billion investments posted in 2019 first quarter.
  • The company’s Retained Earnings is now positive at N1.96 billion, from the N1.83 billion hole in the first quarter of 2019.
  • Net Assets stood at N15.11 billion, up from N10.56 billion estimated at the end of 2019 first quarter.

Financial Strength

  • Cornerstone’s Debt Ratio is currently estimated at 58.16%, which is 14.33% below the estimated 67.88% in the corresponding quarter.
  • Total Debt was 1.39 times of the Equity Value, lower than the 2.11 times replicated in 2019. Although this is an improved position, we are of the opinion that it can be even be enhanced over time.
  • We also estimated that Net Assets is the same as 41.84% of the Total Assets value, which is an improved state when compared to the 32.14% estimated in 2019.
  • Going by the estimated beta value of Cornerstone Insurance we can safely conclude that, it operates on low liquidity and does not enjoy consistent patronage.

Profitability Ratio

  • Pre-Tax Margin stood at 11.40%, as against -0.83% in 2019.
  • Profit Margin stood at 11.40%, compared to -2.05% in the corresponding quarter
  • The profit derived from the float (Insurance Profit) is currently estimated at 37.13%, down from 50.12% in the corresponding quarter
  • The return achieved on Equity is valued at 1.54%, against -1.12% in 2019.

Efficiency Ratio

  • Expenses Ratio, which can also be used to measure profitability, stood at 12.66% from the 21.61% estimated in the 2019 first-quarter numbers.
  • Cornerstone’s Loss Ratio is currently fair at 56.87%, though higher than 51.69% in the corresponding quarter.
  • The company’s Combined Ratio is still fair at 72.75%, though higher than the 68.98% estimated from its 2019 financial indices.
  • Operating Expenses is estimated at 14.93% of the Gross Premium Written, which is fairly below 14.97% in the corresponding quarter.
  • Similarly, Gross Premium Written is 12.66% of Total Assets Value, lower than the estimated 14.57% in the comparable period.

Investment Ratios

  • The amount earned per share of Cornerstone Insurance stood at N0.03, 14.71% better than the N0.01 loss reported in the corresponding quarter.
  • Total Comprehensive Income per share is currently estimated at N0.02, this is higher than the Total Comprehensive Loss of N0.01 per share.
  • P/E-Ratio is now estimated at 17.05x, versus 29.95x in the corresponding quarter.
  • The said earnings per share is a yield of 5.86% over the price of Cornerstone on the exchange as of the time this report was presented to investors.
  • Currently, Book Value of Cornerstone stands at N1.03, higher than the estimated N0.72 at the end of 2019.
  • Confirming a seemingly under-priced position of Cornerstone shares is the estimated Price to Book Value at far below unity.


  • While trying to place a value on Cornerstone Shares, we carefully explored a non-dividend paying valuation model, which places high consideration on earnings growth. Thus, each unit of Cornerstone shares is conservatively priced at N0.11 and we Rate it a Hold.

Related Articles

Back to top button