AXA Mansard overtakes AIICO Insurance to become most profitable listed firm

Axa Mansard has overtaken AIICO Insurance to become the most profitable listed insurers in Africa’s largest economy after net income more than doubled.

AXA Mansard, the largest insurer by market capitalization, saw half year net income surged by 154.18 percent to N3.60 billion, as the insurer recorded improved underwriting position while operating and underwriting expenses are within the single digit growth rate.

That compares with AIICO Insurance, (N2.78 billion); Mutual Benefit Assurance, (N1.56 billion); NEM Insurance, (N1.56 billion); Cornerstone, (N1.0 billion); Wapic, (N654 million); Lasaco, (N632.15 million), Prestidge, (N620 million), and Linkage, (N550.12 million).

AXA Mansard recorded the largest expansion in return on average equity, which means it has deployed the resources of its owners in generating higher profit than peer rivals.

There are concerns that the coronavirus related claims and deterioration in the credit quality of fixed income securities could undermine listed insurers’ future profit and returns to shareholders.

The cumulative average return on equity of the largest companies on the bourse fell to 5.73 percent in June 2020 from 10.40 percent as at June 2020, according to data gathered by Businessday.

Nigerian insurers have the poorest valuations among sub-saharan African countries.

Lack of clear cut business models and meagre dividend means investors will continue to refuse to buy shares of these entities.

Analysts at Afrinvest Securities Limited in a recent report on the insurance industry observed that industry price-to-book ratio stood at 0.43x, which compared with South Africa (1.99x), Egypt (1.65x) and Kenya (0.64x).

The insurance sector of the Nigerian economy contracted by 28.15 per cent in the second quarter of the year.

The sector continues to lag its peers in terms of penetration which stood at 0.5% compared with South Africa (12.9%), Kenya (2.8%), Angola (0.8%) and Egypt (0.6%) while density at $6.2 also remains weak compared to South Africa ($762.5), Kenya ($40.5), Angola ($30.5) and Egypt ($22.8).

Analysts are optimistic that a scheme the planned recapitalization of will unlock growth in the industry. Many firms operate on weak capital that hinders them from participating in big ticket business.

“There is a need for insurers to plug the funding gap between asset and liabilities and also, reprice policies in the light of the current interest rate environment,” said analysts at Afrivest Securities.