A global credit rating agency specialising in the insurance sector, AM Best, has assigned a Financial Strength Rating (FSR) of C++ (Marginal) and a Long-Term Issuer Credit Rating (ICR) of “b+” (Marginal) to Linkage Assurance Plc, a top non-life insurance company in Nigeria.
The ratings reflect the underwriter’s balance sheet strength, which the credit agency assessed as strong, as well as its marginal operating performance, limited business profile, and marginal enterprise risk management.
Linkage’s balance sheet provides a strong point by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR).
The company’s risk-adjusted capitalisation is supported by adequate internal capital generation and low underwriting leverage.
However, an offsetting rating factor is Linkage’s high exposure to illiquid assets, with one single private equity investment comprising approximately half of the company’s capital and surplus.
The marginal operating performance assessment considers Linkage’s high combined ratio, which has exceeded 120 per cent in each of the past five years (2019–2023).
While the loss ratio has generally been robust, overall underwriting results are constrained by the company’s high expense base and small scale. AM Best expects overall earnings to remain skewed toward investment income, albeit subject to potential volatility given the company’s reliance on dividend income from its large private equity investment.
Linkage is a mid-tier player in Nigeria’s insurance market. The company writes a diversified insurance portfolio by line of business; however, there is a concentration in the motor business on a net basis. Linkage has good prospects for organic growth in a rapidly developing market, though the company’s ability to grow profitably is constrained by its limited scale.
The stable outlook assigned to these ratings reflects AM Best’s expectation that Linkage will maintain its current balance sheet strength and operating performance over the near to medium term.
This rating assignment provides stakeholders with an independent assessment of Linkage Assurance’s financial strength and creditworthiness, which is crucial for policyholders, investors, and regulators in the Nigerian insurance market.
