Rating: Hold

Current Market Price: N1.50
Year High: N1.71
Year Low: N0.35
Fair Value: N2.28

Equity Analyst: Tunde Segun Jeariogbe

Introduction

• This report observed the financial numbers of Lasaco Assurance for the year ended 31^st December 2020, compared same to the similar numbers for 2019, to establish growth and make investment recommendations accordingly. Other full-year numbers were used along with the current one for valuation analysis.
• We have observed that the company maintained its annual dividend policy despite posting a negative total comprehensive report of up to N283.14 million.
• The company posted an outstanding Profit after Tax of N679.35 million, from N315.74 million in the corresponding year. However, due to Revaluation (loss)/surplus on property, plant, and equipment and Actuarial losses on gratuity, Total Comprehensive Income turned negative.
• See below for a detailed analysis.

Dividend Information

• At the end of the 2020 financial year, the management of Lasaco Assurance proposed an outstanding dividend of 10k per 50k ordinary share.
• Please note that this is the highest in more than four years, that last cash dividend paid was 5 kobo at the end of the 2019 financial year
• The said dividend is a yield of 7.30% over the price of Lasaco Assurance on the Exchange on the day the result was made available to the investors.
• Meanwhile, it paid 26.99% of its Earnings per Share.
• Thus, the estimated Sustainable Growth Rate is  2.42%
• As of the time this report was compiled, details of the dividend had not been released.

Statement of Comprehensive Income

• Gross Premium Written improved by 17.09% over that of the corresponding year at N10.93 billion, from N9.34 billion in the corresponding of last year.
• Gross Premium Income improved to N10.96 billion from N9.78 billion in its 2019 full-year result.
• Insurance Expenses grew by a marginal 2.78% to N3.95 billion, as against N3.84 billion in the corresponding year.
• Net Premium is stated as N7.01 billion, 18.80% above the N5.90 billion in the comparable year.
• Underwriting Income is valued at N8.04 billion above the N6.71 billion in the comparable year
• Claim Expenses through the year stood at N3.24 billion, 49.46% above the N2.17 billion of the 2019 financial year.
• Underwriting Expenses increased by 25.77% to N2.59 billion from N2.06 billion in the period of last year.
• Thus, the Underwriting Profit at the end of the 2020 financial year is N1.97 billion, this is against N2.29billion in the corresponding year.
• Investment Income for the year was valued at N552.24 million, lower than the N736.36 million reported in 2019.
• Insurance profit is estimated at N2.58 billion higher than N3.03 billion estimated in 2019.
• Operating Expenses increased by 5.74% to N2.90 billion, compared to the N2.74 billion reported in its 2019 financials.
• Profit before Tax is currently estimated at N669.43 million, as against N347.77 million posted in the 2019 numbers.
• Having taken care of the Tax Expenses the management of Lasaco Assurance reported N679.35 million as profit for the year as against N315.74 million in the corresponding year.

Statement of Financial Position

• At the end of 2020 full-year, Total Assets is valued at N20.53 billion, 10.95% above the N18.51 billion reported at the end of 2019.
• Total Liabilities was estimated at N12.73 billion, versus N10.35 billion in the comparable year.
• Properties Plant and Equipment investment dropped by 12.35% to N2.07billion, which is below the N2.36 billion posted in the 2019 financial year.
• Retained Earnings remained positive at N844.86 million, as against N737.70 million in 2019.
• Net Assets stood at N7.80 billion, as against N7.97 billion estimated at the end of the 2019 business session.

Financial Strength

• Lasaco’s Debt Ratio is currently estimated at 62.01%, this is 8.99% above the estimated 56.89% in the corresponding year.
• Total Debt at the end of the quarter is 1.63 times of the Equity Value, higher than the 1.32 times replicated in 2019, which shows that more debt was deplored in returning value to investors during the year
• We also estimated that Net Assets is the same as 37.99% of the Total Assets value, a drop from the 43.11% estimated in 2019.
• Going by the estimated beta value of Lasaco Assurance we can safely conclude that it operates on low liquidity and does not enjoy consistent patronage.

Profitability Ratio

• Pre-Tax Margin stood at 6.37%, compared to 3.72% in 2019.
• Profit Margin stood at 6.21%, an improvement over the 3.38% reported in the preceding year.
• Profit made on the float (Insurance Profit) is currently estimated at 36.05%, lower than the 51.41% in the corresponding period of last year.
• The return achieved on Equity is valued at 8.71%, as against 3.96% in 2019.

Efficiency Ratio

• Expenses Ratio which can is also used to measure profitability stood at 24.55%, versus 34.25% estimated from the 2019 numbers.
• Lasaco Assurance’s Loss Ratio is currently good at 46.28%, though higher than 36.79% in the corresponding quarter.
• The Combine Ratio was 83.24%, higher than the 71.70% estimated from its 2019 financial indices.
• Operating Expenses came to 26.52% of the Gross Premium Written, fairly below the 29.36% in the corresponding year.
• Similarly, Gross Premium Written is 53.26% of Total Assets Value, slightly above the estimated 50.47% in the comparable year.

LASACO ASSURANCE
EFFICIENCY RATIOS
	2020	2019	%Chg
EXPENSES RATIO	24.55%	34.25%	-28.32
LOSS RATIO	46.28%	36.79%	25.81
COMBINE RATIO	83.24%	71.70%	16.10
OPEX TO GE-WRITTEN	26.52%	29.36%	-9.69
GE-WRITTEN TO TA	53.26%	50.47%	5.53

Investment Ratios

• The amount earned per share of Lasaco Assurance shares listed on the Exchange stood at N0.37, up from the N0.26 earned in the corresponding year.
• P/E-Ratio is now estimated at 0.27x versus 0.17x in the corresponding year, which is very outstanding.
• The said EPS represents a yield of 27.04% over the price of Lasaco Assurance on the exchange as at the time this report was made available to the investing public
• Currently, the Book Value of Lasaco Assurance is N4.26 above the estimated N1.09 at the end of 2019.
• Confirming a seemingly under-price position of Lasaco Assurance shares price on the floor of the exchange is the estimated Price to Book Value standing far below unity.

Valuation

• Having considered the outstanding performance posted by Lasaco Assurance in its last audited financials and the board’s consistency in the payment of dividends on a yearly basis, we have conservatively Valued its share at N2.88 each. Consequently, given the gap between our intrinsic value and the current price of Lasaco on the Exchange, we have rated it a Buy