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 Dipo Olowookere
The last trading session of the week on the floor of the Nigerian Exchange (NGX) Limited ended on a positive note, as it rallied by 0.08 per cent on Friday.
This was buoyed by strong investor sentiment due to renewed buying pressure, which left 35 stocks on the gainers’ chart, as 33 stocks ended on the losers’ log, indicating a positive market breadth index.
According to data, Eterna gained 10.00 per cent to close at N42.35, Union Dicon appreciated by 9.70 per cent to N16.40, John Holt grew by 9.25 per cent to N9.45, Tantalizers rose by 8.41 per cent to N4.64, and Fidson expanded by 7.27 per cent to N88.50.
Conversely, RT Briscoe lost 10.00 per cent to finish at N12.06, SCOA Nigeria retreated by 9.96 per cent to N34.35, ABC Transport receded by 9.96 per cent to N6.25, Mecure crashed by 9.96 per cent to N61.50, and Berger Paints declined by 9.93 per cent to N66.65.
Business Post observed that the industrial goods space appreciated by 1.20 per cent yesterday, while the energy index improved by 0.19 per cent.
However, the insurance counter fell by 0.61 per cent, the consumer goods segment shed 0.56 per cent, and the banking industry depreciated by 0.11 per cent.
The All-Share Index (ASI) was down by 161.00 points on Friday to 196,968.15 points from 196,807.15 points on Thursday, while the market capitalisation went down by N119 billion to N126.437 trillion from N126.318 trillion.
A total of 586.2 million units of shares worth N30.6 billion were transacted in 62,699 deals during the trading day versus the 634.0 million shares valued at N29.1 billion traded in 66,286 deals a day earlier, showing a jump in the trading value by 5.16 per cent, and a decline in the trading volume and number of deals by 7.54 per cent and 5.41 per cent, respectively.
The activity chart was led by First Holdco with 43.9 million units worth N2.3 billion, Access Holdings exchange 43.2 million units valued at N1.1 billion, Zenith Bank transacted 40.0 million units for N3.7 billion, GTCO sold 38.9 million units worth N4.6 billion, and Jaiz Bank traded 31.5 million units valued at N323.4 million.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange went up by 0.22 per cent on Friday, March 6, as a result of the rise in the share prices of five securities on the platform.
During the session, the market capitalisation of the bourse added N5.60 billion to close at N2.519 trillion versus the preceding session’s N2.513 trillion, and the NASD Unlisted Security Index (NSI) appreciated by 9.35 points to 4,256.41 points from 4,256.41 points.
The five price gainers were led by 11 Plc, which gained N29.02 to close at N319.25 per unit versus Thursday’s closing value of N290.23 per unit, Central Securities Clearing System (CSCS) Plc appreciated by N1.19 to N81.35 per share from N80.16 per share, Nipco Plc increased by N1.00 to N285.00 per unit from N284.00 per unit, FrieslandCampina Wamco Nigeria Plc rose by 72 Kobo to N125.20 per share from N124.48 per share, and UBN Property Plc improved by 19 Kobo to N2.17 per unit from N1.98 per unit.
On the flip side, Okitipupa Plc lost N20.00 to settle at N230.00 per share compared with the previous day’s N250.00 per share, NASD Plc declined by N5.21 to N51.00 per unit from N56.21 per unit, and First Trust Mortgage Bank Plc declined by 21 Kobo to N1.90 per share from N2.11 per share.
The volume of securities traded by market participants went down by 10.6 per cent yesterday to 3.4 million units from 3.8 million units, and the value of securities dropped 85.3 per cent to close at N62.4 million versus N423.3 million, while the number of deals jumped 4.8 per cent to 44 deals from 42 deals.
CSCS Plc remained the most traded stock by value (year-to-date) with 37.2 million units valued at N2.3 billion, followed by Okitipupa Plc with 6.3 million units worth N1.1 billion, and MRS Oil Plc with 3.4 million units sold for N506.8 million.
Resourcery Plc was the most traded stock by volume (year-to-date) with 1.05 billion units traded for N408.7 million, followed by Geo-Fluids Plc with 123.1 million units transacted for N481.6 million, and CSCS Plc with 37.2 million units worth N2.3 billion.
By Adedapo Adesanya
For another week, the Naira closed without recording a gain against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX), as FX demand pressure continues to mount.
On Friday, the country’s legal tender further depreciated against the greenback by N5.82 or 0.42 per cent to trade at N1,393.26/$1 compared with the preceding day’s N1,387.45/$1.
Also, the local currency tumbled against the Pound Sterling in the official market segment yesterday by N7.61 to close at N1,859.99/£1 versus Thursday’s closing price of N1,852.38/£1, and crashed against the Euro by N1.58 to settle at N1,611.49/€1, in contrast to the N1,609.86/€1 it was traded a day earlier.
In the same vein, the Naira declined against the Dollar at the GTBank forex desk by N12 during the session to quote at N1,410/$1 versus the previous session’s rate of N1,398/$1, and at the parallel market, it lost N10 to sell for N1,415/$1 compared with the preceding day’s N1,405/$1.
The domestic currency continued its decline despite $300 million in FX intervention sales to banks by the Central Bank of Nigeria (CBN), indicating that the rising demand for foreign payments is outpacing supply. However, worries have heightened as the Naira is entering a threshold that has not previously created panic.
In the international market, the US Dollar held broadly steady and saw its steepest weekly gain in more than a year as the escalating conflict in the Middle East drove demand for safe-haven assets. This creates pressure on other currencies.
This also affected the cryptocurrency market. As tensions escalated in the Middle East last week, investors moved quickly to the safety of the US Dollar, which strengthened as markets began pricing in higher energy prices and reignited inflation fears, potentially delaying Federal Reserve rate cuts.
Ethereum (ETH) dipped by 4.9 per cent to $1,975.54, Solana (SOL) depreciated by 4.8 per cent to $84.08, Bitcoin (BTC) lost 4.3 per cent to sell for $67,725.27, Cardano (ADA) slumped 4.2 per cent to $0.2527, and Litecoin (LTC) shrank by 3.4 per cent to $53.55.
Further, Dogecoin (DOGE) declined by 3.2 per cent to $0.0906, Binance Coin (BNB) slipped 2.9 per cent to $626.32, and Ripple (XRP) went down by 2.6 per cent to $1.36, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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