Fourteen insurers still have their share price below 50 kobo after the removal of par value price floor of 50 kobo by the Nigerian Stock Exchange (NSE) in January, 2018.
The new pricing rule introduced last year specifies that the price of every shares listed on the Exchange shall be determined by the market forces and equities may trade below the minimum price floor of 50 kobo per unit.
Under the new pricing methodology, the NSE classified stocks into three different groups, A, B and C. According to the rule, stocks in Category A comprise equities that are priced at N100 and above. Equities in this category require 10,000 units to move the price, while the tick size – mark up or down limit – for this group was pegged at10 kobo.
Stocks in category B consists of equities that are priced at N5 and above but below N100. The volume required to move their price was pegged at 50,000 units, while the minimum tick size was put at five kobo.
Stocks in category C, which consists of over 67 percent of companies listed on the NSE, comprises equities that are trading below N5. The volume required to move their price was put at 100,000 units.
According to the Exchange, the new policy is meant to improve liquidity and efficiency in the market.
Majority of insurance stocks were severely hit following the introduction of the new pricing policy as they became more exposed to poor valuation.
Checks on the share price of listed insurers revealed that Goldlink, Wapic, and 12 others traded below half of N1 at close of business Tuesday, March 8.
Universal, Standard Chartered, Guinea & African Alliance lie flat at 20 kobo, the least in the industry.
Four insurers including AIICO, Linkage assurance, Law union and Prestige assurance trade above 50 kobo, but less than N1.
Top players, Custodian investment and AXA Mansard trade above N1, while price per share average 66 kobo for the industry.
The new par rule value policy now permits quoted entities to trade as low as one kobo which many industry operators believe may result in acquisition or change in management structure of under-performing insurance firms.
Insurance companies going forward would have to ensure their business model become less vague as investors do not like uncertainity or blur lines in making their decisons.
This would help lure invvestors to the sector, although it is not suffucient to overturn their luck ocvernight as insurance culture in Nigeria remains poor.
