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Lasaco Assurance’s Net Income Slumps Despite Reduced Expense Ratio

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While Lasaco Assurance is not spending its way into the future as evidenced in a sharp reduction in expense ratio, it capitulated to the tough and predictable macroeconomic environment as net income slumped.

For the year ended December 2021, Lasaco Insurance net income reduced by 82.35 percent to N106.16 million from N601.59 million the previous year.

And that is despite expense ratio falling to 78.81 percent in the period under review from 81.65 percent the previous year.

The company is honoring its obligation to policyholders as it paid N4.12 billion in claims, which represents a 27.16 percent increase from 2020’s N3.24 billion.

Claims ratio otherwise known as loss ratio moved to 49.60 percent in December 2021 from 46.28 percent as at December 2020, according to MoneyCentral calculations.

The combined ratio deteriorated to 128.42 percent in December 2021 from 127.94 percent the previous year.

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.

Interestingly, the insurer incurred N6.54 billion in management expenses in December 2021, and that is 14.29 percent higher than 2020’s N5.72 billion.

Insurers in Africa’s largest economy are seeing claims expenses spike on the back of mounting obligations from policyholders. Also, inflationary and foreign currency volatility have ballooned the replacement cost of assets.

Of course, the reopening of the economy after a long period of lockdown to prevent the spread of the coronavirus paved the way for people to drive their cars and that saw mounting obligations for motor vehicle claims.

Further analysis of Lasaco Assurance’s financial statement shows gross premium written (GPW) was up 21.50 percent to N13.28 billion in December 2021 from N10.93 billion as at December 2020.

Net premium income followed the same growth trajectory as it rose by 18.40 percent to N8.30 billion in December 2021 from N7.01 billion the previous year.

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