Economy
Agusto & Co Predicts 8% Growth for Insurance Sector in 2017
By Dipo Olowookere
A report for the insurance industry for 2017 has been released by Agusto & Co, a rating firm based in Nigeria.
In the report, Agusto & Co noted that the role of insurance in the Nigerian economy cannot be overstated and that its strategic importance in underwriting business and individual risks is evident in an estimated gross premium income (GPI) of S58;356 billion generated by the insurance industry in 2016, reflecting a 10 percent growth over FY2015.
The agency said it projects a moderated growth rate of 8 percent on account of the recession which is expected to have significant impact on major business lines in 2017.
It also estimates that 28 percent of the Industry’s GPI was paid out as claims in 2016, helping businesses and individuals recover from losses quickly.
The insurance industry is a major contributor to economic growth and development as premiums collected are invested in banks and deployed to fund government projects, the report said.
In 2016, the Nigerian insurance industry invested an estimated S58;178 billion in the banking industry as placements & deposits and held Treasury instruments of over S58;270 billion.
“We expect increased investments in government securities in 2017 as Insurers take advantage on higher interest rates,” the report said.
Opportunities in the Insurance Industry abound as the Industry’s penetration rate stood at 0.4 percent in 2015.
Insurance density rate which measures GPI as a proportion of population is $8.3 compared to Kenya’s $36.4 and South Africa’s $970.8.
It said going forward, evolving risks such as job losses, cyber risks among others will offer prospects for the development of new insurance products.
“We expect increased government spending in the near term which will support GPI growth.
“In addition, micro insurance- which allows people purchase insurance cover in small daily premiums payable using mobile phones- is expected to gain traction in the near term with insurers using various avenues to reach the uncaptured market,” the report said.
“The current inflationary pressures have an upside on the Industry’s investment portfolio performance as interest rates soar to overcome rising inflation and negative returns on investments.
“We expect these positives to offset the negatives in the industry; therefore, we attach a stable outlook to the Insurance Industry. The industry will also benefit from a probable devaluation and continued growth in life business in 2017,” it added.
Like most other Industries operating in Nigeria, the Insurance Industry was adversely impacted by the downturn in the economy which had its roots in declining crude oil prices since 2014.
The Nigerian economy went into a recession in the third quarter of 2016 following two consecutive quarters of negative GDP growth.
This slowed down activities in various industries including the insurance industry.
Inflationary pressures also had a negative effect on cost of operations as well as the value of long term savings. Reduced consumer purchasing power threatened GPI growth and increased surrenders in the life business segment.
In the non-life segment we observe a preference for less expensive insurance covers such as third party insurance cover as against comprehensive motor insurance cover.
The foreign exchange demand management tactic adopted by the Central Bank of Nigeria in controlling outflows from already depleted reserves resulted in a scarcity of FX which in turn impacted dollar denominated premiums negatively.
The naira depreciated significantly against the dollar, trading at S58;305/$ to S58;315/$ in the interbank market and as high as 358;498/$ in the black market.
The resultant effect is a reduction in the insurance cover on assets such as motor vehicles whose prices have almost tripled. We expect these FX challenges to persist in 2017.
The industry’s regulatory environment is likely to change in the near term in response to the current macroeconomic climate.
Regulators are beginning to emphasize risk profiles of insurance companies as against amount of capital held. The proposed Risk Based Supervision Framework which is expected to be implemented in the near term will prompt reviews of business strategies.
“As a result, we foresee mergers and acquisitions in the Industry as well as foreign direct investments in the near term.
“Nonetheless, Agusto & Co is of the opinion that restrictions in the current FX regime may impede foreign direct investments.
Another regulation that will shape operations in the insurance industry is the Bancassurance Guidelines which has received significant attention from regulators in recent times,” the report said.
The competitive landscape remains intense across major business lines such as motor, fire, general accidents, oil& gas and life insurance.
The Agusto and Co Nigerian Insurance report ranks Industry players by various indices across major business lines, providing a snapshot of key performance indicators at a glance.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south territory with a decline of 0.56 per cent on Wednesday, April 2.
This brought down the market capitalisation by N13 billion to N2.417 trillion from N2.430 trillion, and downed the NASD Unlisted Security Index (NSI) by 22.57 points to 4,062.87 points from the previous session’s 4,062.87 points.
It was observed that the NASD exchange ended with three price gainers and three price losers during the trading day.
MRS Oil Plc depreciated by N19.00 to close at N171.00 per unit compared with the previous price of N190.00 per unit, NASD Plc lost N4.14 to trade at N37.36 per share compared with Wednesday’s N41.50 per share, and Central Securities Clearing System (CSCS) Plc gave up N2.00 to sell at N78.00 per unit versus N80.00 per unit.
On the flip side, FrieslandCampina Wamco Nigeria Plc appreciated by 19 Kobo to N93.00 per share from N92.81 per share, Food Concepts Plc expanded by 15 Kobo to N2.87 per unit from N2.72 per unit, and Great Nigeria Insurance (GNI) Plc improved by 2 Kobo to 52 Kobo per share from 50 Kobo per share.
Yesterday, the volume of securities dipped by 91.8 per cent to 260.2 million units from 3.2 billion units, the value of securities went down by 98.1 per cent to N154.2 million from N8.3 billion, while the number of deals soared by 53.3 per cent to 46 deals from 30 deals.
GNI Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 56.9 million units valued at N3.9 billion, and Okitipupa Plc with 27.5 million units traded for N1.8 billion.
The most traded stock by volume on a year-to-date basis was also GNI Plc with 3.4 billion units sold for N8.2 billion, trailed by Resourcery Plc with 1.1 billion units exchanged for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units transacted for N1.2 billion.
By Adedapo Adesanya
The Naira dropped N2.09 or 0.15 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, April 2, to trade at N1,380.79/$1 compared with Wednesday’s rate of N1,378.70/$1.
However, it appreciated against the Pound Sterling in the official market by N2.77 to quote at N1,824.86/£1 versus the N1,836.57/£1 it was traded at midweek, and improved its value against the Euro by N10.54 to N1,591.92/€1 from N1,602.46/€1.
Yesterday was the last trading session of the week for the local currency in the spot market, as the market will be closed on Friday and Monday for the Easter Holiday.
At the black market, the Nigerian Naira maintained stability against the greenback yesterday at N1,405/$1, but gained N8 at the GTBank FX counter to settle at N1,388/$1, in contrast to the previous session’s N1,396/$1.
Pressure eased on the domestic currency as strong policy indicators have helped calm the majority of worries within the financial systems. Particularly in the remittance segment, the apex bank has directed all International Money Transfer Operators (IMTOs) to route remittance transactions through designated Naira settlement accounts in banks, a move aimed at boosting transparency and channelling more foreign exchange into the formal market.
This helps take off pressure from the foreign reserves, which have fallen below the $50 billion mark as they are gradually decreasing rather than falling sharply.
Meanwhile, the cryptocurrency market was bullish on Thursday, as macro sentiment shifted against recent optimism after reports that Iran is drafting a protocol with Oman to manage traffic through the Strait of Hormuz, easing concerns about disruptions to a key global oil route.
The remarks came after U.S. President Trump on Wednesday night vowed to hit Iran “extremely hard” in the coming weeks and that the Strait of Hormuz would “open naturally” once the war ends.
Cardano (ADA) chalked up 1.9 per cent to trade at $0.2435, Dogecoin (DOGE) grew by 1.2 per cent to $0.0912, Ethereum (ETH) appreciated by 0.8 per cent to $2,066.37, Bitcoin (BTC) added 0.5 per cent to sell at $67,080.53, Solana (SOL) increased by 0.5 per cent to $79.91, and Ripple (XRP) jumped 0.2 per cent to $1.31.
Conversely, Binance Coin (BNB) dipped 0.7 per cent to $586.90, and TRON (TRX) depreciated by 0.3 per cent to $0.3147, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
By Dipo Olowookere
The local stock market was relatively flat on Friday, as the bears and the bulls shared the spoils of war, though investor sentiment turned bullish compared with the preceding session’s bearish posture.
Data from the Nigerian Exchange (NGX) Limited showed that the All-Share Index (ASI) was marginally down by 4.66 points as it ended at 201,698.89 points versus Wednesday’s 201,703.55 points, and the market capitalisation slightly contracted by N3 billion to N129.806 trillion from N129.809 trillion.
Customs Street was shut on Friday because of the public holidays declared by the federal government today and next Monday.
Business Post reports that John Holt declined by 9.91 per cent to N15.45, Abbey Mortgage Bank shed 9.60 per cent to trade at N8.95, International Energy Insurance slipped by 6.48 per cent to N3.32, Chams shrank by 5.30 per cent to N3.75, and Tantalizers depreciated by 5.18 per cent to N4.03.
On the flip side, Unilever Nigeria improved by 10.00 per cent to N103.40, Fortis Global Insurance gained 9.82 per cent to trade at N1.23, Multiverse appreciated 9.81 per cent to N20.15, Legend Internet advanced by 9.38 per cent to N6.30, and Zichis grew by 9.02 per cent to N14.14.
The market breadth index was positive during the trading session, as there were 35 appreciating stocks and 24 depreciating stocks.
Yesterday, investors traded 560.0 million equities valued at N19.3 billion in 49,676 deals, in contrast to the 815.5 million equities worth N33.3 billion transacted in 52,641 deals in the preceding day, representing a drop in the trading volume, value, and number of deals by 31.33 per cent, 42.04 per cent, and 5.63 per cent, respectively.
Secure Electronic Technology dominated the activity log with 59.7 million shares valued at N61.1 million, Wema Bank exchanged 52.0 million equities worth N1.4 billion, VFD Group transacted 36.0 million stocks for N410.5 million, Access Holdings sold 35.3 million shares valued at N914.8 million, and Chams traded 31.0 million equities worth N115.0 million.
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