The bad year for the Nigerian equities market was difficult for all sectors in the economy but the insurance sector was resilient with almost half of companies in the sector on the stock exchange outperforming the market.
After the banking sector, the insurance sector followed with the most number of stocks that performed better than the NSE main board index in 2018. NEM Insurance, the fourth best performing stock of 2018, led the group with 62.5 percent positive return since January and was followed by Continental Reinsurance (36.43 percent), AIICO (21.15 percent) and Linkage Assurance (9.09 percent).
Goldlink Insurance and Prestige Insurance did not have a difference on price at the beginning and the end of the year. STACO Insurace (-4.00 percent), AXA Mansard (5.1 percent), Veristas Kapital (-8.00 percent) and Wapic Insurance (-16.0 percent) were the remaining companies to outperform albeit the negative returns recorded.
The NSE Insurance Index was the only sub-sectoral index that recorded below single digit returns in 2018. It closed last Friday at -9.62 percent. “There is an opportunity in safeguarding investments in the insurance sector on the exchange. There are good companies that are selling for great prices and are not as risky when you buy at a right price. A majority of stocks are trading below N1 and some close to the price floor.”
The sector also recorded a significant number of companies that lost over 40 percent of its value because of the minimum price floor of 0.20 kobo earlier in 2018. Investors looking for bumper rewards tend to look for stocks that are relatively cheap and if such stocks also have a low absolute value, it will mean a higher return if the price moves upwards.
Going forward, investors in Nigeria will be looking to increase their exposure to sectors in the economy that offer the most money-spinning rewards, whereas current investments made in under-performing sectors in the first half of 2018 will be dropped. This strategy is widely recognized as sector rotation.
The Nigeria Stock Exchange (NSE) insurance index increased by 7 percent in the first half (H1) of 2018 making it the best performing index on the bourse for the period according to the data compiled from Bloomberg. The insurance index also outperformed general market performance as the market maintains a bearish state despite a 4 percent growth in the All Share Index (ASI) in H1 2018.
Speaking about the insurance index, Dolapo Ashiru an investment analyst opines that regulations that was planned to put insurance companies into tiers has made the index see a rally in anticipation of consolidations among these companies in the first half of the year.
IFEANYI JOHN
