Lasaco Assurance Plc continues to be well capitalized relative to risk taken even amid a low yield environment and the coronavirus Pandemic as the insurer maintains a comprehensive capital adequacy of 140 percent as at September 2020.
MoneyCentral’s calculations show that the ratio is well above the regulatory minimum of 100 percent, a strong capital position underpinned by consistent growth in premium income and profitability, and this means the company can meet its long-term debt obligations.
The improvement in solvency ratios reflects the ongoing product shift toward more profitable protection-type products, as well as slower declines in the reserving rate, leading to more available capital, and higher investment income supporting earnings.
At the end of the third quarter the company showed a positive solvency margin of N7.02 billion, which is higher than the regulators minimum capital adequacy of requirements of ₦5 billion.
Regulators across the globe pay much attention to the ratio because it shows how strong a firm is in taking on more big ticket risk and warding off macroeconomic headwinds that are unavoidable.
Lasaco Insurance, which has sufficient cash flows to meet its long term liabilities, saw net income spike by 32.28 percent to N862.55 million as at September 2020 from N652.04 million the previous year.
The growth in profit is largely driven by uptick in revenue, as the insurer’s innovative products are fast making an inroad into the Nigerian market even amid a myriad of challenges bedeviling the industry.
Gross Premium income (GPI) was up 18.8 percent to N4.83 billion as at September 2020 from N4.06 billion the previous year.
However, the insurer is paying out more in claims than it is making in premium income as the combined ratio for the third quarter stood at 122.18 percent, which is higher than the 113.53 percent reported the previous quarter.
There are mounting obligations from policyholders and business interruption claims, as well as obligations to those who had their properties destroyed during the EndSARS protects.
Claims or loss ratio increased to 42.73 percent in the period under review from 28.07 percent the previous year; while total claims expenses were up 80.17 percent to N2.06 billion in the period under review.
Analysts have warned that an economic downturn exacerbated by the coronavirus pandemic and a low interest rate environment is inimical to the capital position of insurers, as investment income, a major driver of profitability, is expected to fall.
Analysts at PWC in a recent report on the Nigerian Insurance Industry said there is the likelihood or possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts.
“The virus has resulted in a surge in health, travel and business interruptions, supply chain and event cancellation claims; pressure on sales from reduced business activity,” said analysts at PWC.
The Nigerian Insurance Commission (NAICOM), the body that regulates insurance activities in the country, had hiked the minimum capital requirement for insurers as it seeks to shore up the capital of operators so that they can take on more risk and compete with their peers on the continent.
Life and general insurance companies were asked to shore up their existing minimum paid-up capital from N2bn and N3bn to N4bn and N5bn respectively by the end of December 2020, and meet the final minimum paid-up capital requirements of N8bn and N10bn respectively by the end of September 2021.
Composite companies and reinsurance firms were asked to shore up from existing minimum paid-up capital of N5bn and N10bn to N9bn and N12bn by end of December 2020 to N18bn and N20bn respectively by the end of September 2021.