Insurance stocks stagnate under harsh environment, low patronage

THE nation’s insurance industry has not fared too well under prevailing harsh operating environment and low patronage even as the share prices on the trading floor of the Nigerian Stock Exchange (NSE), have stagnated at the nominal value year-to-date, following negative sentiments.

Additionally, the prevailing slowdown in economic activities, and consequent poor penetration of insurance products resulted in high claims ratio against low premium income, with some insurers unable to settle claims under such challenging position. Due to the harsh economic realities, underwriters are still struggling to find their feet as a major of the financial services sector in Nigeria, as slow growth continues to be a key challenge they must overcome in order to encourage greater levels of investment.

The negative attitude of Nigerians to the sector might not be unconnected to the poor attitude of insurers as regards non-payment of claims. Some insurance companies are very notorious for defaulting in payment of claims, which has adversely affected the industry’s image and consequently eroded confidence by the insured.

For instance, as at December 2018, Cornerstone Insurance hit a five-year low of N0.20 per share. Year-todate, the stock is down 60 per cent, while investors suffered slightly bigger losses at 64.9 per cent.

The decline in stock’s price over the last few years may be closely connected to its poor performance, as it has not paid dividend in over three years, and recorded losses after tax of N1.7 billion in 2016, and N3.3 billion in the

2017 financial year. However, in its result for the nine months ended September 2018, Cornerstone made a profit after tax of N658 million, against a loss after tax of N2.1 billion recorded in the comparative period of 2017. The stock price as at Thursday, July 18, 2019 was 22 kobo.

Similarly, Prestige Assurance Plc suffered contraction in its profitability in 2018, despite considerable growth in its top-line.

Net profit dropped by 20.3 per cent to N423.8 million in 2018 against 37.7 per cent growth in gross premium to N4.66 billion.

Key extracts of the audited report and accounts for the year ended December 31, 2018, showed that Prestige Assurance’s gross premium increased from N3.39 billion in 2017 to N4.66 billion. Pretax however decreased from N697.99 million in 2017 to N645.43 million in 2018.

After taxes, net profit dropped from N531.84 million in 2017 to N423.8 million in 2018. With these, earnings per share declined from 9.90 kobo in 2017 to 7.89 kobo in 2018.

After the removal of par value price floor of 50 kobo by the NSE in January 2017, many insurance stocks still have their share price below 50 kobo.

As at July 18, 2019, the insurance firms that fall under this category are African Alliance 20 kobo, Consolidated Hallmark 31 kobo, Cornerstone Insurance 22 kobo, Guinea insurance 20 kobo, and International Energy Insurance 38 kobo.

Others include: Lasaco Assurance 34 kobo, Law Union and Rock 48 kobo, Mutual Benefit 20 kobo, Niger insurance 20 kobo, and Prestige Assurance 48 kobo.