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MoneyCentral is reporting that Linkage Assurance Plc continues to be well capitalised relative to risks taken, as a surge in investment income helped the insurer return to the path of profitability.
The insurer maintained a comprehensive solvency margin ratio of 266 percent as at September 2022.
The improvement in solvency ratio reflects the innovative products introduced into the market that are driving revenue growth, as well as higher investment income supporting earnings.
It is worth highlighting that the liquidity position and the strength of an insurers’ balance sheet is of paramount importance to regulators who seek financial stability.
The solvency margin is a minimum excess on an insurer’s assets over its liabilities set by regulators. It can be regarded as similar to capital adequacy requirements for banks. The solvency ratio of an insurance company is the size of its capital relative to all risks it has taken.
Linkage Assurance posted a profit after tax (PAT) of N2.08 billion in September 2022, from a loss position of N1.78 billion as at September 2021.
The bottom line was supported by investment income that got a boost from the dividend income of N3.1billion received from Stanbic IBTC Pension Managers Ltd.
Drilling down the books shows the insurer made N4.26 billion in income from investment securities, which compares with N2.11 billion realized in previous year.
Analysts are of the view that insurers are benefiting from rising interest rates stoked by the monetary tightening stance of the central bank who is all out to rein in inflation.
Usually, insurance companies reinvest part of premium income in fixed income securities, equities, and real estate to realize sizable returns that make up for slim underwriting income.
The Nigeria 10 year government bond has a 14.663 percent yield, according to data from World Government Bonds.
That compares with a yield of 4.17 percent as of Nov 3, 2020 as the Monetary Policy hiked the benchmark interest rate to 15.50 percent in its last sitting in September.
Linkage Assurance posted an underwriting profit of N356.23 million from a loss of N837.59 million the previous year.
It paid N1.68 billion in claims as at September 2022, which is 36.12 percent lower than 2021’ N2.63 billion.
The insurer recorded a 17.94 percent increase in gross premium written (GPW) to N10.68 billion in September 2022 from N9.69 billion as at September 2021.
Gross premium income (GPI) increased by 18.78 percent to N9 billion in September 2022 from N7.57 billion as at September 2021.