Quoted insurance firms’ shareholders fund hits N160bn in Q1

The shareholders fund of 14 insurance firms have hit N160.15 billion in the first quarter of the year, 5.15 per cent increase from N152.50 billion recorded the previous year.

Analysts are of the view that the uptick in shareholders fund doesn’t presuppose that these firms have favourable policyholders fund that will enable them take on more risk.

The shareholders’ funds of Aiico Insurance, AXA Mansard, Cornerstone Insurance, Continental reinsurance,

Staco Insurance and Linkage Assurance stood N8.79 billion, N18.23 billion, N10.26 billion, N20.06 billion, N10.31 billion and N19.03 billion respectively.

While the insurers have recorded increase in shareholder’s fund, some of them have been unable to utilize owners’ resources to generate higher profit.

The cumulative return on equity (ROE) of the 14 firms under our coverage fell to 3.79 per cent in the period under review from 4.18 per cent the previous year.

Aiico’s ROE declined to 6.22 per cent in March 2017 from 11.23 per cent as at March 2017.

NEM insurance’s ROE fell to 7.52 per cent within the period as against 30.83 per cent as the company’s net income slumped 73.60 per cent.

Mutual Assurance’s ROE moved to 8.71 per cent in March 2017 from 4.60 per cent in March 2016 as a surge in investment income lifted the company’s first quarter profit.

Linkage Assurance’s ROE increased to 7.48 per cent in March 2017 as against 3.15 per cent in March 2016. Sovereign Trust’s ROE increased to 7.61 per cent in the period from 4.10 per cent as at March 2016.

Analysts say insurers should introduce more innovative products that will bolster revenue and unlock the value of shareholders as most firms have stock price stuck at N0.50 for the past 4 years.

Such stagnation means investors have never had the appetite for insurance stocks close to half a decade.

AXA Mansard, the largest insurer by market value, has a total market capitalization of N23 billion, which is lower than the N34 billion market value of tier 2 lender Fidelity Bank.

In countries like the United States, Europe and Asia, insurance and reinsurance companies are so strong that they acquire banks but that has not happened in Nigeria since insurers don’t have the capital base to execute such a strategic plan.

Insurance firms are operating in a volatile and deteriorating macroeconomic environment as lack of money in circulation hindered individuals and corporates from taking a cover.

Also, a recessionary environment worsened by rising inflation and severe dollar scarcity resulted in declining underwriting profit as claims expenses mounted.

Nigeria’s economy fell by 0.52 per cent in the 2016, the worst recession in 25 years, according to the National Bureau of Statistics (NBS).

Unemployment rate for 2016 stood at 14.20 per cent in 2016, the highest in 7 years.

The cumulative underwriting profit of the 14 insurance firms under our coverage dipped by 14.48 per cent to N10.86 billion in March 2017 while claims expenses increased by 12.84 per cent to N14.24 billion.

 

BALA AUGIE