Why Leadway Assurance remains largest insurer in Nigeria?

Leadway Assurance Limited remained resilient as its giant strides were sustained in 2019 even amid weak economic growth and a myriad of challenges hobbling the industry.

The consistent earnings growth and improved underwriting income came as surprise to investors because operators in the industry were from reeling low premium income as penetration remains very much lower compared to peers across Africa and Europe.

The Nigerian economy has been growing sluggishly since the country existed a recession 2016, and the renewed clashes between farmers and herders-men (that has claimed thousands of lives contributed) undermined Agriculture GDP.

As a result of a border closure imposed by Federal Government in order to curb smuggling of rice and other products, and consequently, headline inflation rate spiked as price of food skyrocketed.

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Investors’ apathy towards the equity market gathered momentum in 2019 as they dumped shares due to lack of transformation policy on the part of government and poor corporate results.

Investors are still dumping shares and investing packing their money in emerging market countries with benign macroeconomic environment and stable foreign exchange policy.

Since the start of last year, yields began a precipitous drop, and the dip gathered steam in the last quarter of the year when the central barred individuals and local corporates from investing in Open Market Operations (OMO) auctions.

According to the Q1-2020 GDP report published by the National Bureau of Statistics (NBS) on 24 May 2020, economic growth slowed to a nine-quarter low of 1.87 percent yoy from 2.55 percent yoy in Q4-2019 and 2.12 percent yoy in Q2-2019.

Additionally, the statistics body added that capital importation for the first quarter (Q1) 2020-the total amount of foreign investment inflows into the Nigerian economydeclined by 31 percent year on year (y/y) to $5.85 billion in the first (Q1) 2020 from $8.51 billion in Q1 2019.

Notwithstanding the indices that shaped the global economy in 2019 and the attendant macroeconomic challenges in Nigeria, Leadway Assurance recorded 26.53 percent jump in net incocme to N9.19 billion in 2019 from N7.26 billion in 2018.

The growth in profit was largely driven by strong investment returns and excellent asset allocation. And the insurer’s solid liquid position gives it the leeway to invest in government securities to magnify shareholders earnings.

Leadway Assurance’s investment income increased by 38.84 percent to N31.80 billion in December 2018 from N22.90 billion as at December 2017.

Its N90.60 billion grow premium written is the highest in the industry, dwarfung

Aiico Insurance’s premium of N50.11 billion, Custodian Investment Plc, N47.20 bil

General Insurance business and Special Risk Report have been a one of the major drivers of Leadway Assurance gross premium written growth.

Leadway Assurance is the most profitable and efficient insurers as it continue to control costs and maximize the wealth of shareholders.

Combined ratio stood at 78.37 percent as at December 2019, the lowest in the industry.

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.

With adequate underwriting, the insurer can write any risk as it has hoard of assets that it uses pay claims as at when due.

Claims expenses were up 11.78 percent to N38.46 billion in December 2019 from

N34.41 billion as at December 2018. Loss ratio increased to 54.23 percent in the period under review from 48.13 percent the previous year.

The significant increase in claims expense was cushioned by recoveries from reinsurers, salvage and subrogation.

While other companies are struggling with huge expenses that erodes profitability, Leadway Assurance’s management expenses reduced by 14.84 percent to N7.18 billion in the period under review from N6.38 billion as at December 2018.

Notwithstanding the distribution of the non-insurance subsidiaries, the company’s total assets recorded 25.28 percent growth to N396.30 billion in 2019 from N316.33 billion as at December 2018.

The drivers of the significant growth in asset can be traced to the significant increase in annuity premium invested majorly in government debt securities, increase in fair value asset at fiar value by 52.83 percent to N238.42 billion in December 2019 from N156.0 billion the previous year.

“We continue to demonstrate our commitment to our loyal customers through our customer services delivery channels, underpinned by a motivated team, outstanding brokers and agents, innovations and technology,” said Tunde Hassan Odukale, the managing director/ceo of the company.

“I am proud that we have transmitted the principle of devoted customer-focus into a five-decade legacy that would continue to be the compass with which we steer the next half-century of operational excellence. With our balance sheet strength and technological innovations, we are confident of maintaining market leadership, whilst deepening insurance penetration to our youthful African population,” odukale said.

Analysts say Leadway Assurance has the ammunitions or financial strength to weather the coronavirus headwinds.