Leadway’s valuation could top N58.39 billion if listed

by | December 11, 2017 2:35 am



Leadway Assurance Limited valuation could top N58.39 billion based on peer valuation and the Nigerian insurer would be have been the largest insurance firm by market value if it was listed.

The valuation is based on peer price to sales or premium ratio of 1.08x as a multiple of the insurer’s gross premium income of N53.32 billion as at December 2016.

Leadway’s Assurance’s estimated market capitalization is two times the N22.57 billion market cap of most capitalized listed firm, AXA Mansard Insurance.

Leadway Assurance has utilized the resources of owners in generating higher profits as return on average equity (ROAE) spiked amid volatile and tough operating environment.

The ROAE is a measure of profitability paramount to investors and shareholders of insurance stocks because it measures how many naira of profit a company generates with each naira of shareholders’ equity.

For the year ended December 2016, ROAE increased to 39.30 percent from 14.40 percent as at December 2015. Return on Average Asset (ROAA) rose to 7.1 percent in December 2016 as against 2.60 percent as at December 2015.

Analysts say if Leadway Assurance were a listed firm, investors would value its stock higher than peer rivals.

The Nigerian insurer’s innovative and market penetrating products lifted premium income amid a myriad of challenges holding back the growth of operators in the industry.

Gross premium income (GPI) and Net Premium Income (NPI) increased by 4.87 percent and 3.30 percent to N53.65 percent and N41.25 billion respectively.

Leadway Assurance controls 25.15 percent of life insurance market in Nigeria, the highest in the industry, according to a recent report by investment house Chapel Hill Denham Research Limited.

According to Chapel Hill Denham Research, Nigeria’s Life insurance premium is forecast to grow 12.10 percent between 2015 and 2025. The investment says the forecast is based on its assumed population growth of 3.0 percent per annum.

“We estimate density (consumption per capital) will rise by 8.10 percentp.a to N1.36 by 2025, indicating a possible 2.60 times expansion of life insurance premium income to N320.68 billion,” said analysts at the investment house.

Further analysis of the financial statement of Leadway Assurance shows the insurer recorded an underwriting profit of N10.53 billion as at December 2016, thanks to a 75.55 percent reduction in underwriting expenses to N9.51 billion in the period under review.

Leadway Assurance has an efficient underwriting capacity as combined ratios (CR) improved to 78.05 percent in December 2016 from 133.92 percent as at December 2015.

The Nigerian insurer premium to surplus ratio or net premium to shareholders fund ratio fell to 106.25 percent in December 2016 from 150.26 percent as at December 2015.

This means Leadway’s premium is 1.50 times shareholders fund.

This ratio is designed to measure the ability of the insurer to absorb above-average losses and the insurer’s financial strength. The lower the ratio, the greater the company’s financial strength.

Insurers’ Market Cap

Firms Market Cap Ranking (%)
Leadway Assurance 58,390,000,000.00 0.38
Mansard 22,575,000,000.00 0.15
Custodian and 22,056,990,731.25 0.14
Continental Re 13,795,749,934.96 0.09
NEM 8,026,364,427.76 0.05
Universal 8,000,000,000.00 0.05
Cornerstone 7,364,753,807.50 0.05
Equity 7,000,000,000.00 0.05
UnityKapital 6,933,333,333.00 0.05
Wapic 6,691,369,124.00 0.04
Standard A 6,455,515,293.00 0.04
Linkage 4,959,999,996.90 0.03
Standard Trust In 4,670,543,804.50 0.03
STACO 4,670,000,000.00 0.03
Mutual Benefit 4,000,000,000.00 0.03
Niger 3,869,739,684.00 0.03
AIICO 3,673,008,374.40 0.02
Lasaco 3,661,716,710.50 0.02
Regency 3,334,375,000.00 0.02
Law Union 3,136,321,265.00 0.02
Consolidated Hall M 3,000,000,000.00 0.02
Prestige 2,759,146,980.00 0.02
Royal Exchange 2,572,685,037.00 0.02
International Energy 642,042,744.50 0.00
  153,848,656,248.27 1

Source: NSE

 

 BALA AUGIE

 

 

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