Custodian and Allied Vs Leadway Assurance: Custodian and Allied solidly ahead


By Folakemi Emem-Akpan

Our analysis of these two insurance companies shows that Leadway Assurance is the bigger of the two. While Leadway had a gross written premium of N52.7 billion in 2016, its contemporary had a much smaller N28.4 billion. While Leadway recorded an after tax profit of N7.6 billion, that of Custodian and Alliedwas a lower N5.3 billion.

Despite this disparity in size, our analysis shows that Custodian and Alliedtakes the top marks in terms of profitability ratios for the 2016 financial year. Of the seven profitability ratios we examined, it took the lead in six while Leadway only won in one.

Gross premium growth rate

This was the first ratio in which Custodianand Alliedcame out tops. For the year, it was able to grow its gross premium written by29.2 per cent to N28.4 billion. This 29.2 per cent growth rate is as compared to a growth rate of 18.7 per cent in the prior year, and a growth rate of 13.1 per cent recorded in 2016 by Leadway. This result was achieved despite the fact that Leadway had the higher turnover of the two insurance companies in terms of absolute figures.

Pre tax profit growth rate

Not only did Custodian and Alliedgrow gross premium written faster than Leadway did, it was also able to grow its pretax profit faster than Leadway did. Custodian and Allied’s pre tax profit growth rate was 28.9 per cent better than that of the preceding year while Leadway’s pre tax profit growth rate declined by 5.4 per cent instead.


For the 2016 year, Custodian and Alliedwas the winner in terms of return on assets (ROA). ROA for the year was 10.9 per cent, up from 10.1 per cent in the prior year. This means that of every N100 worth of assets deployed by Custodian And Allied, N10.90 accrued to it as pre-tax profit while Leadway was able to record a lower N5.00 pre-tax profit from every N100 worth of assets employed.


As regards ROE, Custodian And Allied’s ROE was 17.8 per cent, and this fell short of the 19.6 per centthat Leadway recorded. This makes it one of the ratios in which Leadway led its competitor.

Expense ratio

This was another of the ratios in which Custodian and Allied came out tops. Expense ratio for insurance companies should be as low as possible, and Custodian and Alliedhad the low ratio out of the two insurance companies examined.Custodian and Alliedhad an expense ratio of 8.7 per cent, lower and better than Leadway’s ratio of 12.1 per cent.

Loss ratio

This is another ratio that should be kept as low as possible, as a consistently high loss ratio can indicate that an insurer is selling their insurance too cheaply. Custodian and Alliedwas the winner in this regards, having a loss ratio of 31.4 per cent, lower and better than Leadway’s 55.9per cent result.

Operating ratio

This is a ratio combination of the expense ratio and loss ratio. A combined ratio below 100% means an insurance company is operating at an ‘underwriting profit’ – a profit before adding the returns from investing customers’ premiums. On the flipside, a combined ratio of more than 100% represents an ‘underwriting loss’, which means an insurer is reliant on investment income to square the ledger. So the idea is to have an operating ratio as far below 100 per cent as possible. In this regards, Custodian and Alliedwas the winner, having an operating ratio of 66 per cent, as compared to Leadway’s 68 per cent result.

While both insurers are operating at an underwriting profit, Custodian and Alliedseems to be doing a better job of it.

In conclusion

It is imperative to note that both insurers did not do badly in terms of profitability and growth when their results are analysed in a stand-alone analysis. It is only when their results are put side by side that Custodian and Allied comes out tops.


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