Year-to-date growth: insurance sector leads at stock market (Nigeria)


By Goddy Egene | This Day, Nigeria August 7, 2018

Bargaining hunting in insurance stocks has made the Nigerian Stock Exchange (NSE) Insurance Index to emerge the best performing indicator year-to-date (YtD). The continuing bear run in the stock market caused by exit of foreign investors and low demand by domestic investors had left market indices bleeding YtD.

Apart from the benchmark NSE All-Share Index (NSE ASI) which recorded aYtDdecline of 4.5 per cent as at last Friday, 11 other indices have also recorded negative returns.

However, the only two market of the indices – the NSE Insurance Index and NSE Premium Index – recorded YtDgains. 

The NSE Insurance Index lead  with 4.2 per cent, while  the NSE Premium Index followed with a gain of 3.1 per cent.

The worst YtD decline was by the NSE ASeM Index, which was 25.5 per cent, followed by the NSE Industrial Goods Index with 13.1 per cent.

The NSE Industrial Goods Index declined by 10.2 per cent, while NSE Main Board Index shed 5.8 per cent.

Others that recorded YtD decline were the NSE 30 Index (5.8 per cent); NSE Oil &Gas Index (3.9 per cent); NSE Corporate Governance Index(3.1 per cent);NSE Banking Index(2.8 per cent);NSE Lotus 11 Index (2.3 per cent); and NSE Pension Index (1.2 per cent).

Meanwhile, a further analysis of the NSE Insurance Index showed the growth was propelled by six out of the 15 stocks that constitute the index.

The stocks that lifted the indicator were led by N.E.M Insurance Plc which  postedaYtD jump of 77.7 per cent, followed by AXA Mansard Insurance Plc with 37.3 per cent. AIICO Insurance Plc has appreciated 34.6 per cent, while Law Union & Rock Insurance Plc, Linkage Assurance Plc and Continental Reinsurance Plc gained 29.8 per cent, 21.2 per cent, and 20 per cent respectively.

Market operators said the bargain hunting in insurance sector by some discerning investors was expected given the low prices of the most of the stocks.

Since the NSE introduced a new pricing methodology and par value rule on January 29, 2018, the share prices of insurance stocks have suffered significant value erosion.

According to operators, the low prices offer a very good opportunity to invest in some of the stocks that have strong fundamentals and bright future prospects.

In all, 16 of the 26 insurance stocks on the NSE are currently trading below 50 kobo par value since the new pricing methodology was introduced in January. 

 Although the lower prices offer new entry opportunities in some of stocks, investor apathy for insurance stocks are basically caused by two major factors.

“Investors’ low demand for insurance stocks stemmed mostly from their poor corporate performance, which often makes them to pay low dividends.  

Besides, low awareness about their operations equally discourages investors from the sector,” a stockbroker, Mr. Ayo Oguntayo  had said.

According to him, while some insurance companies have strong fundamentals and have put in place strategies to deliver improved returns to shareholders, most potential investors are not aware of such prospects.

Related stories


AsokoNews Brief

Sign up for the Asoko newsletter, highlighting Africa's top business and investment developments each week