AM Best has affirmed the Financial Strength Rating of C++ (Marginal) and the Long-Term Issuer Credit Rating of “b+” (Marginal) of Linkage Assurance Plc (Linkage) (Nigeria). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Linkage’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

Linkage’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s risk-adjusted capitalisation is supported by its low underwriting leverage. An offsetting factor is Linkage’s high exposure to illiquid assets, with one single private equity investment comprising over half of the company’s capital and surplus. In addition, Linkage is exposed to the elevated levels of economic, political and financial system risks in Nigeria, where all of its assets are located, as well as all of its revenue is generated.

The marginal operating performance assessment considers Linkage’s high, albeit gradually improving, combined ratio, which has exceeded 120% in each of the last five years (2020-2024). While Linkage’s loss ratio has typically been healthy over this period, underwriting performance is inhibited by its high expense base and small operating 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. 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. Linkage writes a diversified insurance portfolio by line of business; however, there is a growing concentration to motor business on a net basis.

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