Succor may have come the way of stock market investors who had endured a long period of capital depreciation in insurance stocks as the index emerged the best-performing sector so far in the year, posting a year-to-date (YTD) return of 22.8 per cent.
This is, in addition to 84.48 per cent return to it recorded in 2023, rating the sector as the second best performing, after the banking index last year.
The sector had been engulfed in a trust deficit, which had stalled its stocks at the nominal value for years. The negative attitude of investors might not be unconnected to the poor attitude of insurers as regards non-payment of claims.
Against all odds, listed companies in the industry have attracted positive sentiment in months, thereby outperforming other indexes and emerging as the toast of investors in the months.
Data from the Nigerian Exchange Limited (NGX) showed that the insurance index gained 22.79 per cent, while the banking index followed with 15.92 per cent YTD return.
The NGX Consumer Goods index ranked third with YTD return of 14.42 per cent. The All-share index trailed with 11.06 per cent appreciation. NGX Industrial index rose by 8.55 per cent. The NGX oil and gas index emerged as the worst-performing with 1.34 per cent appreciation.
One year assessment of stock prices in the sector showed that Regency Assurance, one of the stocks that performed poorly, which stood at 25 kobo as at January 2022, now stands at 52 kobo as at January 12, while Sunu Assurance rose from 29 kobo to N1.43 kobo. Linkage Assurance appreciated from 40 kobo to N1.47 kobo.
Others are Veritas Capital Assurance, which increased to 53 kobo from 21 kobo in 2022. NEM insurance increased from N3.70 kobo to N5.75 kobo. Sovereign Trust Insurance which stood at 24 kobo appreciated to 60 kobo.
Cornerstone Insurance grew from 23 kobo to N1.73 kobo. Consolidated Hallmark Insurance also rose from 55 kobo to N1.47 kobo within the period.
The improved performance may have been impacted by improved financial performance as most of the stocks wriggled out of their loss position to profit territory in 2023.
For instance, NEM Insurance reported a profit after tax (PAT) of N3.499 billion in its half-year (H1) 2023 performance, representing 38 percent increase from N2.534 billion recorded in 2022.
Cornerstone Insurance Plc’s PAT rose to N11.251 billion, a 2,567.6 per cent increase resulting from net gains on financial assets when compared to N408 million in 2022.
Also, AIICO Insurance reported a profit after tax of N5.301 billion, a 0.13 per cent increase from N5.294 billion in 2022.
Further, SovereignTrust Custodian Insurance recorded a 10.39 per cent increase in profit after tax to N427.330 million in 2023 as against N387.086 million posted in 2022.
AXA Mansard Plc buoyed by net exchange gain reported a 582 per cent growth in net earnings to N13.124 billion for 2023 from N1.923 billion recorded in 2022.
Custodian and Allied Investment also recorded a 33.07 percent increase in profit after tax to N6.285 billion in 2023 as against N4.723 billion posted in 2022.
Reacting to the performance, Vice President of Highcap Securities, David Adonri said the unusually high movement in the Insurance Sector is a domino effect from the general rise in market prices.
“I am not aware of any specific price-sensitive information that is driving the Insurance Sector. However, I suspect that investors are now turning their attention there because the prolonged rally has moved most popular stocks beyond penny levels where several retail investors operate.
“Therefore, one can postulate that the unusually high movement in the Insurance Sector is a domino effect from the general rise in market prices. The small-cap stocks in the sector like Veritas Cap, Mutual Benefit, Cornerstone, Prestige have led the charge,” he said.
Chief Executive Officer of Wyoming Capital and Partners, Tajudeen Olayinka, said the market prices of insurance stocks are being pushed by the relative pricing of instruments.
