Linkage Assurance Plc ended 2014 with a stellar premium increase of 23.03 percent as the company continues to pay less claims to policy holders.
Net premium earned was N1.95 billion in 2014, compared with N1.58 billion the previous year, the Lagos-based company said in an e-mailed statement on the NSE.
Gross premium income increased 13.60 percent N3.05 billion amid low industry penetration.
The premium income means the Nigeria insurer is tapping into the Nigeria large market with its growing population that are begging for policy holders.
Despite the increased premium penetration, the company is paying fewer loses to policy holders as claims ratio reduced to 18.40 percent in 2014 from 24.10 percent last year.
Claims expenses were down by 14.40 percent to N552.96 million in 2014 as against N646 million the previous year.
Linkage Assurance operating expenses ratio of 51.26 percent is higher than the 54.15 percent recorded last year.
This means for N1 the company makes in revenue, it spent 51.26 percent to run the company and pay management.
The operating expenses ratio is far higher than the claim ratio which implies the company is paying fewer claims at the expense of spiralling management expenses. Management and provision for doubtful accounts grew by 17.50 percent to N1.05 billion in 2014 as against N855.68 million.
While the company’s premium income increased, the bottom line slowed slowing as net income fell by 21.55 percent to N325 million in 2014 as against N414.28 million in 2013.
Linkage Assurance will have premium bolstered as regulators in Africa largest economy are formulating market penetrating policies in order to deepen penetration.
NAICOM, the body that regulates insurance business in Nigeria introduced the Risk Based Supervision, which implementation will kick off soon, migration to International Financial Reporting Standard (IFRS) from the Nigerian Generally Accepted Accounting Principles (NGAAP); Market Conduct Reforms, Claims Settlement Reforms, Financial Inclusion strategy among others .
The body also introduced the no premium no cover policy, which states that premium should and a lot of others that came with the MDRI initiative.
Analysts say the policy will serve as catalysts for economic development as it is expected to attract foreign investors into the economy, boost government’s recognition and confidence in the industry and improved on public confidence and patronage to the industry.
Linkage Assurance’s return on equity (ROE) reduced to 2.07 percent in 2014 as against 2.69 percent last year. The lower returns means the company’s use of shareholder’s resources in generating higher profits needs improving.
Earnings per share EPS fell to 41k in 2014 compared with 52k the same period of the corresponding year.
The company’s share price closed at N0.50 on the floor of the NSE while market capitalization was N4 billion.
BALA AUGIE
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