Optimism as insurance stocks soar YTD amid competition, others

As insurance stocks soar Year-To-Date (YTD), with huge capital appreciation, investors have stressed the need for industry regulators and professional bodies to step up measures aimed at sustaining the growth trajectory recorded in the sector.

The investors urged them to intensify efforts at mitigating challenges that have caused suboptimal performance of the insurance sector in Nigeria. The Guardian checks showed that the share price of nine firms with a combined market capitalisation of N245.7 billion showed that succour may have come the way of investors, who had endured a long period of capital depreciation and loss of investment under the sector.

Data from the Nigerian Exchange Limited (NGX) showed that Veritas Kapital, with a market capitalisation of N20.2 billion, began the year with a share price of 37 kobo but at the close of transactions yesterday, September 2, 2024, the share price closed at N1.46, adding 295 per cent YTD.
Similarly, Cornerstone Insurance, which reopened for transactions in January 2024 at a share price of N1.40 closed yesterday at N2.44 representing an increase of 73.4 per cent. The company closed its transactions on Tuesday with capitalisation of N44.3 billion.

For Guinea Insurance with capitalisation of N3.97 billion, its share price rose by 72.4 per cent YTD from 29 kobo to 50 kobo. AIICO insurance share price appreciated from 80 kobo to N1.20 adding 50 per cent to the price valuation. The company’s capitalisation is currently put at N43.9 billion.

NEM Insurance and Lasaco with capitalisation of N37.6 billion and N4.22 billion began the year with a share price of N6.30 and N1.90. The two firms have added 19.1 per cent and 21.1 per cent of their price valuation YTD to close at N7.50 kobo and N2.30 kobo on Tuesday.

Sovereign Trust Insurance with capitalisation of N10.4 billion started the year with a share price of 42 kobo and has added 73.8 percent to its valuation to close at N11.25 kobo yesterday.

Custodian & Allied and Linkage assurance rose from N9 and 80 kobo to N11.25 kobo and 97 kobo adding 25 per cent and 21.3 per cent with capitalisation of N66.2 billion and N14.9 billion respectively.

This is coming even as the sector has faced tremendous challenges not only in the last few years but also in the last decade, which ranged from issues of poor penetration to apathy.

Historically, low rates in the past 12 years have meant riskier investments for insurance companies, and firms were further put to the test by an increase in claims in 2020-2021 due to the coronavirus pandemic.

However, going by its performance over the last few years, the sector appeared to have maintained a steady growth in premium generation, assets base and market size in efforts to meet the N1 trillion market margin in premium income generation set by the Market Development and Restructuring Initiative (MDRI) of the National Insurance Commission (NAICOM).

For instance, the industry’s gross premium income rose to N726.2 billion as of the last quarter of 2022, representing a significant growth compared to the N260 billion premium income status of the sector at the time of launching the MDRI initiative, which set the N1 trillion target.

Also, the gross premium by the Nigerian insurance industry for the fourth quarter of 2023 stood at N1.003 trillion. This represented about 27 per cent growth compared to N790 billion recorded in 2022.

According to the Statistics Department of the Directorate of Research, Statistics and Publications of the NAICOM, the figure indicated a progressive trend of positive market performance at the close of the 2023 fourth quarter.

Also, ratings agency, Agusto & Co. has noted that in the full year (FY) 2023, the Nigerian insurance industry recorded robust performance, with an estimated gross premium income (GPI) surpassing the significant milestone of N1 trillion.

The stellar performance of the seven listed firms showed that the improvement recorded in the sector in the past few years has translated to optimal efficiency in the operations of some of the practitioners and forestalled stagnation in their share prices.

In addition, insurance companies have been using digital technology to drive further transformations in the way they do business in recent times. For example, insurance companies are now using data analytics to better understand customer needs and preferences and to identify new growth opportunities.

This transformation is set to continue in the years ahead, as insurance companies increasingly adopt new technologies and approaches that will help them to remain competitive in a rapidly changing market.

The investors argued that improvement in the corporate governance structures of listed firms under the sector would ultimately translate into robust dividend payout and enhanced investors’ confidence.

They pointed out that there was a need to enhance the performance of those firms that are already churning out good figures in their financials while improving the capability of companies currently underperforming in the sector.

The shareholders noted that the negative attitude of Nigerians to insurance may not be unconnected to the poor attitude of insurers as regards non-payment of claims. Some insurance firms default in payment of claims, which has adversely affected the image of the industry and consequently the confidence in the insurers.

President of New Dimension Shareholders Association of Nigeria, Patrick Ajudua, admitted that the insurance sector is finding its feet and rediscovering itself in Nigeria.

He said the rebound recorded on the economy as a result of more capital expenditure is impacting positively on the insurance sector. He added that prompt settlement of claims as seen from the audited report of most insurance companies has rekindled confidence in the sector and would continue to impact their performance.