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Agusto & Co Predicts 8% Growth for Insurance Sector in 2017

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Agusto & Co Predicts 8% Growth for Insurance Sector in 2017

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.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

Airtel Africa, 17 Others Lift Stock Exchange by 0.46%

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Local Stock Exchange

By Dipo Olowookere

Nigeria’s stock exchange closed positive on Friday by 0.46 per cent following a renewed bargain hunting in Airtel Africa, Guinness Nigeria, Sterling Bank, Ardova and 14 others.

This pushed the All-Share Index (ASI) of the Nigerian Exchange (NGX) Limited by 199.52 points to 43,308.29 points from the previous day’s 43,108.77 points and jerked the market capitalisation higher by N104billion to N22.598 trillion from N22.494 trillion.

Royal Exchange and ABC Transport grew by 10.00 per cent each at the trading session to finish at 55 kobo and 33 kobo respectively.

AIICO Insurance gained 9.38 per cent to close at 70 kobo, University Press appreciated by 8.89 per cent to N2.94, while Regency Assurance jumped 7.69 per cent to 42 kobo.

On the other hand, UPDC REIT topped the losers’ table of 24 members with a price depreciation of 9.82 per cent to settle for the day at N5.05.

Champion Breweries retreated by 5.90 per cent to N2.55, UPDC moderated by 5.07 per cent to N1.31, FTN Cocoa eased by 4.76 per cent to 40 kobo, while Veritas Kapital contracted by 4.55 per cent to 21 kobo.

Unlike the preceding day, the level of activity was mixed yesterday with the trading value declining by 15.15 per cent to N3.6 billion from N4.2 billion, while the trading volume rose by 14.73 per cent to 305.3 million units from 266.1 million, with the number of deals rising by 13.96 per cent 4,450 deals from 3,905 deals.

FCMB finished the day as the most active stock with 81.1 million units worth N247.9 million, trailed by GTCO with 29.5 million units valued at N738.3 million.

Further, Access Bank transacted 28.1 million units valued at N253.9 million, Honeywell Flour sold 16.8 million units worth N70.2 million, while Zenith Bank exchanged 13.2 million units for N320.2 million.

At the market on Friday, the insurance sector gained 1.98 per cent, while the quartet of the consumer goods, banking, energy and industrial goods counter lost 0.89 per cent, 0.33 per cent, 0.03 per cent and 0.01 per cent respectively.

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Economy

Naira Closes Week Flat as Cryptocurrencies Suffer Heavy Loss

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Cryptocurrencies

By Adedapo Adesanya

The local currency closed flat against the US Dollar at both the Investors and Exporters (I&E) and the interbank segments of the foreign exchange (forex) market on Friday, November 26.

At the I&E segment of the market, the domestic currency retained the preceding session’s rate of N415.07/$1 amid an upshoot in the turnover for the trading session, according to data from the FMDQ Securities Exchange.

At the market window, the turnover achieved at the final session for the week was $215.47 million, 119.7 per cent or $117.4 million higher than the $98.07 million recorded the day before.

At the interbank window, the Naira halted its depreciation against the American currency as it remained unchanged at N411.64/$1 at the close of transactions yesterday.

In the same trend, the local currency was flat against the Pound Sterling to sell for N548.55/£1, while the Nigerian currency stuck to N462.07/€1 as it was sold at the preceding session.

Bears Rampage Cryptocurrencies

Meanwhile, cryptocurrencies witnessed a bearish outcome on Friday as all the 10 cryptos monitored by Business Post weakened and analysts attributed the dip to the rout that gripped global investments following the discovery of a new coronavirus variant.

The World Health Organisation (WHO) said the new variant known as B.1.1.529 may contain more than 30 mutations. The United Kingdom and other nations have temporarily suspended flights from six African countries in response.

At the market, Bitcoin (BTC) recorded a 6.7 per cent depreciation to sell at N30,862,885.94, Ethereum (ETH) fell by 1.7 per cent to trade at N2,388,999.00, while Ripple (XRP) witnessed a 6.3 per cent fall to N543.44.

Furthermore, (DASH) dropped 5.9 per cent to trade at N109,054.38, Litecoin (LTC) slumped by 7.2 per cent to N111,931.77, Tron (TRX) made a 7.6 per cent loss to close at N52.66, Cardano (ADA) retreated by 5.0 per cent to N918.72, Binance Coin (BNB) witnessed a 4.2 per cent loss to sell at N242,540.63, Dogecoin (DOGE) also followed with a 4.2 per cent slide as it traded at N123.87, while the US Dollar Tether (USDT) moved down by 0.7 per cent to sell for N569.90.

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Economy

Unlisted Stocks Trade Flat Friday Amid Low Investor Appetite

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unlisted stocks

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange closed in the flat territory on Friday as the interest of investors in unlisted stocks waned during the session.

According to data from the exchange, the level of activity declined as there was a 99.9 per cent fall in the volume of securities transacted by market participants as only 288 units exchanged hands compared with the 371,600 units traded at the previous day.

In the same vein, there was a decrease in the total value of shares transacted by traders on Friday and this depleted by 99.0 per cent as securities valued at N65,088 transacted in contrast to the N6.5 million exchanged on Thursday.

Business Post reports that the number of deals executed during the last trading session of the week waned by 50.00 per cent as only two deals were recorded as against the four deals carried out at the preceding trading day.

At the close of transactions, the major performance indicators of the exchange remained unchanged, with the NASD Unlisted Security Index (NSI) flat at 744.90 points as the market capitalisation remained intact at N615.42 billion.

The unlisted securities market was without a price gainer or a price loser as the equity price of all the stocks on the exchange remained unchanged.

Also, the most traded stock by volume on a year-to-date basis remained Food Concepts Plc as it has transacted a total of 11.4 billion units of its shares worth N14.4 billion. Lighthouse Financial Services Plc has traded 1.1 billion units worth N546.32 million to occupy the second spot, while Geo Fluids Plc, which claimed the third place, has traded 1.0 billion units worth N700.1 million.

By value, on a year-to-date basis, Food Concepts Plc was also on top of the chart with the sale of 11.4 billion units worth N14.4 billion, followed by Nigerian Exchange (NGX) Group Plc with 456.5 million units valued at N9.2 billion, and VFD Group Plc with 10.4 million units valued at N3.5 billion.

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