Linkage Assurance Plc may be unable to meet its 2017 performance, due to a spike in claims expenses for the nine months ended September 30, 2018. Linkage Assurance is our STOCK PICK for the week.

About the company 

Linkage Assurance Plc was incorporated in Nigeria on 26th of March 1991 as a private limited liability company domiciled in Nigeria. It was registered by the National Insurance Commission (NAICOM) on the 7th of October 1993 to transact general insurance business and commenced operations in January, 1994.

The Company became a public limited liability company in 2003 and its shares were listed on the Nigerian Stock Exchange (NSE) on 18 November 2003.

Bua group

Recent results 

Results for the third quarter ended September 30, 2018, show gross premium written increased from N3.3 billion in 2017 to N4.5 billion in 2018. Profit before tax fell sharply from N2.8 billion in 2017 to N387 million in 2018. Profit after tax also dropped from N2.8 billion in 2017 to N83 million in 2018.

Pricing 

Current Share Price: N0.67
Year High: N0.72
Year Low: N0.56
Year to Date: -6.9%
One year return: -1.85%

Price Outlook  

The possibility of the stock rising significantly are quite slim. The stock is trading at 19% above its year high of N0.67.

Market sentiments, as a whole, are negative. The NSE All-Share Index is down 2.21% year to date, in the first month of trading. Foreign investors, the key players in the stock market have largely exited due to the upcoming elections.

Outlook  

9M 2018 results show the company may be unable to meet last year’s performance. The firm made an underwriting loss of N698 million in 2018 as against a profit of N37.2 million in 2018.

The decline was largely due to a spike in net claims expenses from N641 million in 2017 to N1.8 billion in 2018. The specific claim pertained to an oil and gas exposure, but no further details were provided.

Coronation Research

Linkage Assurance fortunes have been largely tied to its investment income. This, in turn, is driven largely by profits from its stake in Stanbic IBTC PFA. The PFA plays a dominant role in the industry and may continue to do so in the foreseeable future.

In the unlikely, but theoretically possible event of a sharp drop in the PFA’s performance, Linkage would deliver a poor result.

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