Linkage Assurance Plc can meet its obligations to beneficiaries and policy holders, which validates a good financial strength as an increase in investment income helped the insurer return to the path of profitability.
This means the company is financially stable and has the funds to pay claims at any time without encumbrances, and it is realising premium income as its products are making an inroad into the Nigerian market.
Linkage Assurance has a solvency ratio of 268 percent as at December 2022, which means it has 168 percent additional resources above its current liabilities, according to MoneyCentral calculations.
An insurance company generally has to maintain its % Solvency ratio at 100% throughout time. Any insurance company experiencing a % Solvency ratio below 100% should devise a contingency plan against potential losses.
All things considered, a % Solvency ratio of 150% secures the ability of the insurance provider to maintain itself afloat in the case of an adverse event.
It is important to note that the company generated revenue that translated into profitability even amid rising combined ratio as the bottom line also was bolstered by a strong growth in investment income.
It posted net income of N2.32 billion as at December 2022 from a loss of N4 billion the previous year.
Analysis by MoneyCentral shows aside the uptick in premium income, an upsurge in investment income by 105.24 percent has mainly helped the insurer return to profitability.
The insurer said the investment income was buoyed by the dividend income of N3.1 billion received from Stanbic IBTC Pension Managers Ltd, while a high interest rate environment complemented.
It is important to note that the insurer has overcome the EndSAR and Inflation claims headwinds that took the industry unawares as claims ratio reduced to 34.80 percent in December 2022 from 92.72 percent as at December 2021.
Total claims expenses were down 54.28 percent to N2.30 billion in December 2022 from N5.03 billion as at December 2021.
However, the firm spends more on operating expenses to generate premium income as its expense ratio increased to 77.85 percent in the period under review from 70.25 percent the previous year.
That resulted in a combined ratio of 153.02 percent in December 2022, albeit an improvement from 212.10 percent recorded in 2021, according to a net basis calculation by MoneyCentral.
The combined ratio is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations. The combined ratio is typically expressed as a percentage. A ratio below 100 percent indicates that the company is making an underwriting profit, while a ratio above 100 percent means that it is paying out more money in claims that it is receiving from premiums.
Linkage Assurance gross premium written (GPW) increased by 16.21 percent to N12.97 billion in the period under review from N11.16 billion as at December 2021.
Net premium income (NPI) rose by 21.95 percent to N6.61 billion in the period from N5.42 billion as at December 2021.
Further analysis of the breakdown of gross premium written shows the insurer realized N2.58 billion from Fire Business; Motor, N2.68 billion, and oil and gas, N4.11 billion.