Q3 Result – Earnings Momentum Weakens Despite Solid Balance Sheet Expansion and Robust Investment Income

Executive Summary

LASACO Assurance Plc released its unaudited financial statements for the nine months ended 30 September 2025, reflecting a challenging operating environment marked by higher claims expenses and cost pressures, which eroded profitability despite solid top-line and investment income growth. The Group reported a loss after tax of ₦499.0 million, compared to a profit of ₦1.97 billion in the corresponding period of 2024, driven largely by a significant rise in operating expenses and insurance service costs. However, LASACO’s total assets grew 35.3% year-on-year to ₦42.34 billion, underpinned by stronger cash holdings, increased reinsurance assets, and robust investment income.

Insurance revenue rose 39.6% year-on-year to ₦23.84 billion, reflecting improved gross premium income and policy renewals. The result was supported by a notable investment income of ₦2.85 billion, up 240% year-on-year, highlighting LASACO’s sound investment management amid a volatile interest rate environment. Despite the improved investment yield and strong liquidity position, the Company’s profitability was undermined by higher underwriting costs and a sharp rise in operating expenses. Management’s focus in the coming quarters will likely center on cost rationalization, efficient claims management, and maintaining balance sheet strength to support sustained premium growth.

Financial Highlights

₦’000 Group 2025 Group 2024 % Δ YoY

Company 2025 Company 2024 % Δ YoY

Insurance Revenue 23,838,482 17,072,174 +39.6% 23,838,482 17,072,174 +39.6%

Insurance Service Expenses (19,465,005) (13,541,370) +43.7% (19,465,005) (13,541,370) +43.7%

Net Expenses from Reinsurance Contracts Held (2,508,295) (3,178,627) -21.1% (2,508,295) (3,178,627) -21.1%

Insurance Service Result 1,865,182 352,177 +429.5% 1,865,182 352,177 +429.5%

Investment Income 2,544,453 807,387 +215.2% 2,446,316 807,387 +203.1%

Other Investment Income 96,712 29,479 +228.0% 96,712 29,479 +228.0%

Net Fair Value Gain 207,223 436 +47,482% 207,223 436 +47,482%

Operating Expenses (5,701,356) (1,668,055) +241.8% (5,383,236) (1,668,055) +222.6%

Profit/(Loss) Before Tax (404,224) 2,274,339 -117.8% (573,127) 2,274,339 -125.2%

Profit/(Loss) After Tax (499,043) 1,968,948 -125.4% (657,170) 1,968,948 -133.4%

Basic Earnings Per Share (₦) (4.50) 17.76 -125.3% (5.93) 17.76 -133.4%

Revenue and Operational Performance

LASACO reported strong growth in insurance revenue, which expanded by 39.6% year-on-year to ₦23.84 billion, reflecting higher gross premiums from both life and non-life segments. The performance demonstrates resilience in policy renewals and new underwriting, particularly in corporate and retail insurance products. However, the insurance service expenses surged by 43.7% to ₦19.47 billion, driven by increased claims payments and higher actuarial reserves, which compressed underwriting margins. Nevertheless, net reinsurance expenses declined by 21.1%, underscoring improved risk transfer efficiency and favorable reinsurance arrangements.

As a result, insurance service results rose sharply by 429% year-on-year to ₦1.87 billion, demonstrating improved underwriting discipline despite the challenging macroeconomic environment. On the investment front, LASACO recorded a robust investment income of ₦2.85 billion, a 240% year-on-year increase, buoyed by higher yields on fixed-income securities and fair value gains on investment properties. Additionally, the ₦2.50 billion foreign exchange gain significantly bolstered non-operating income, reflecting gains from foreign-denominated assets. However, operating expenses soared by 242% year-on-year to ₦5.70 billion, reflecting rising administrative, regulatory, and personnel costs. This sharp increase in operating expenses was the primary driver of the Group’s swing to a loss in 2025.

Profitability Analysis

LASACO recorded a loss before tax of ₦404.2 million, compared to a ₦2.27 billion profit in the prior year, marking a significant 118% decline in pre-tax earnings.

Key profitability metrics reveal mixed performance:

• Underwriting margin improved marginally on higher reinsurance efficiency.
• Investment yield rose considerably due to favorable market conditions and prudent portfolio allocation.
• Operating expense ratio deteriorated significantly, reflecting management cost pressures.
• Earnings per share (EPS) fell to ₦(4.50), compared to ₦17.76 in 2024, signaling weakened shareholder returns.

While underwriting and investment operations remain strong, elevated costs continue to undermine bottom-line profitability, emphasizing the need for tighter expense management and operational efficiency.

Statement of Financial Position Overview

₦’000 Group 2025 Group 2024 % Δ YoY Company 2025 Company 2024 % Δ YoY

Total Assets 42,337,314 31,264,324 +35.3% 41,836,072 30,942,248 +35.2%

Cash and Cash Equivalents 16,310,707 10,345,031 +57.7% 15,037,649 9,603,420 +56.6%

Financial Assets (Total) 3,285,329 2,434,093 +35.0% 3,285,329 2,434,093 +35.0%

Reinsurance Contract Assets 7,278,435 3,362,448 +116.4% 7,278,435 3,362,448 +116.4%

Investment Properties 8,011,568 8,185,379 -2.1% 7,884,443 7,704,379 +2.3%

Property, Plant & Equipment 3,853,521 3,711,260 +3.8% 3,853,521 3,711,260 +3.8%

Total Liabilities 20,117,514 18,969,943 +6.1% 20,071,913 18,963,224 +5.8%

Shareholders’ Funds 22,219,800 12,294,381 +80.8% 21,764,159 11,979,024 +81.7%

Interpretation: The Group’s balance sheet expanded significantly, supported by strong liquidity growth and prudent capital accumulation. Cash and cash equivalents increased by 57.7%, driven by efficient premium collection and investment income inflows. Reinsurance contract assets more than doubled, reflecting an improved risk-sharing structure and increased exposure to large-ticket policies. The capital base strengthened, with shareholders’ funds rising by 81% to ₦22.22 billion, primarily due to share premium accretion and retained earnings from prior years.

Key Ratios

Ratio 2025 2024 Change

Underwriting Margin 7.8% 2.1% +5.7pp

Investment Yield 12.0% 6.5% +5.5pp

Operating Expense Ratio 23.9% 9.8% +14.1pp

Return on Assets (ROA) -1.2% 6.3% -7.5pp

Return on Equity (ROE) -2.2% 16.0% -18.2pp

Solvency Ratio 1.8x 1.6x +0.2x

Liquidity Ratio 1.9x 1.5x +0.4x

Interpretation:

• Improved underwriting efficiency driven by reinsurance cost savings.
• Investment yield doubled, reflecting effective portfolio repositioning.
• Operating cost pressure remains the largest drag on profitability.
• ROA and ROE weakened, driven by negative earnings.
• Solvency and liquidity positions remain strong, supporting capital adequacy and claims-paying ability.

Strategic Insights

• Revenue Expansion: Sustained premium growth underscores LASACO’s brand strength and customer retention across both life and general insurance segments.
• Investment Strategy: Diversified investment portfolio and favorable revaluation gains boosted non-core income.
• Cost Management: Elevated operating costs highlight the need for digital process optimization and administrative streamlining.
• Capital Strength: The significant growth in shareholders’ funds provides headroom for future business expansion and regulatory compliance.
• Reinsurance Optimization: Enhanced reinsurance efficiency mitigated underwriting losses and improved claims stability.

Strengths

• Strong top-line growth and improved underwriting income.
• Robust investment returns with positive foreign exchange gains.
• Strengthened liquidity and capital base.
• Improved reinsurance structure and risk diversification.

Weaknesses

• High operating costs eroding profitability.
• Earnings volatility due to foreign exchange exposure.
• Margin compression from rising claims and administrative expenses.
• Decline in profitability despite asset growth.

Outlook

LASACO’s near-term outlook remains cautiously optimistic. The company is well-capitalized and liquid, positioning it to weather operational challenges and pursue profitable underwriting opportunities. The focus on cost containment, technology adoption, and enhanced investment diversification is expected to drive gradual earnings recovery. As the macroeconomic environment stabilizes and interest rates normalize, LASACO’s investment yield and underwriting performance should strengthen. However, maintaining profitability will hinge on controlling expense growth and sustaining premium inflows in a competitive insurance market.

Analyst View

“LASACO Assurance Plc’s 9M 2025 performance reflects the delicate balance between growth and profitability. While strong revenue and investment returns underscore the company’s resilience, rising operating costs and claims pressure hindered earnings. The strong balance sheet and improved reinsurance position, however, provide a solid base for long-term stability and growth.”

Conclusion

LASACO Assurance Plc delivered solid operational progress in terms of premium expansion and capital strengthening, yet profitability declined due to higher operating costs and claims-related pressures. The company’s robust liquidity, growing investment income, and expanding equity base highlight its financial resilience. Moving forward, management’s ability to optimize costs, enhance underwriting efficiency, and capitalize on investment opportunities will be pivotal to restoring profitability momentum and reinforcing LASACO’s market leadership within Nigeria’s insurance sector.