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Wednesday, February 1, 2023

Linkage Assurance reports underwriting loss of N41 m in Q1 on oil/gas re-insurance expense

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Linkage Assurance Plc has reported an underwriting loss of N41.17 million in March 2020 from a profit position of N716.70 million due to reinsurance expenses relating to oil and gas.

Reinsurance expenses surged by 123.15 percent to N1.02 billion in the period under review, raising concerns about the insurer’s underwriting capacity.

The company suffered an N443.16 million slide in net fair loss in financial securities, which wiped out gains in investment income.

It reported net loss of N333.49 million for the first quarter of 2020, driven by significant net fair value loss on investment, rising expenses, and mounting claims.

A loss of N338.49 million compares with net income of N439.26 million reported in the same period of 2019, while reinsurance net underwriting income declined to N1.03 billion from N1.21 billion.

Linkage Assurance said it would continue to refine its strategy in line with the political, economic, sociological and technological changes in the industry particularly the impact of Coronavirus (COVID-19) pandemic on the business landscape.

“Also we will continue to develop innovative products, alternative channels of distributions and strategic initiatives that will enable us achieve our corporate goals and objectives. With a medium-to long term perspective, we believe that we will benefit from growth in these initiatives,” said the company.

The coronavirus pandemic has ravaged economies across the globe, battered crude oil price, and caused a stock market rout.

Analysts expect volume of activities to reduce for insurers as lockdown policy imposed by government hindered people from driving their cars.

Also, premium income from marine and oil and gas will take a hit, and some insurers have offered customer refund on their insurance premium during the lockdown.

Linkage Assurance is paying out more in claims and other expenses in generating revenue as combined ratio increased to 175.06 percent in March 2020 as against 87.55 percent as at March 2019.

A ratio above 100 percent means a company is operationally inefficient.

Claims expenses surged by 16,464 percent to N427,364 million as at March 2020, but analysts say rising obligation is not as a result of COVID-19.

Claims ratio increased to 47.65 percent in the period under review, as against a zero figure in 2019.

“Customers may have been following on claims that they did not pursue late last year,” said Monday Utomwen, Chief Risk Officer at West African Insurance Companies Association (WAICA).

Linkage Assurance said it will consolidate on the going initiatives to improve its operational efficiency so as to reduce the cost of doing business, improve business processes, eliminate wastages and achieve higher margins in our core business.

Total underwriting expenses were up 31.15 percent to N652.19 million as at March 2020, while underwriting expense ratio increased to 72.68 percent in the period under review from 46.88 percent the previous year.

What this means is that the insurer is spending more to underwrite its products.

Linkage Assurance’s gross premium written was up 28.16 percent to N2.84 billion as at March 2020, from N2.21 billion as at March 2019.

However, a breakdown of premium per business shows income from oil and gas segment-which makes up total revenue- increased by 9.94 percent to N1.05 billion as at March 2020.

However, net premium income declined by 15.95 percent to N896.75 million as at 2020 from N1.06 billion, thanks to a sharp reduction in reinsurance expenses.

“We have developed and launched a number of retail products. These include the Linkage Third Party Plus, which is a budget friendly motor insurance that provides not only the compulsory Third party protection but an additional Own damage protection to the tune of N250,000,” said the insurer.

Linkage Assurance’s shares closed at N0.48 as at 2:00pm in Lagos, valuing it at N3.52 billion.

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