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
On the Nigerian Exchange (NGX) Limited last week, investors transacted 3.648 billion shares worth N220.568 billion in 251,861 deals compared with the 3.821 billion shares valued at N154.393 billion traded in 258,567 deals a week earlier.
Analysis showed that financial stocks led the activity chart with 2.899 billion units sold for N147.360 billion in 106,603 deals, accounting for 79.48 per cent and 66.81 per cent of the total trading volume and value, respectively.
Services equities recorded a turnover of 164.914 million units valued at N3.615 billion in 16,375 deals, and the consumer goods shares exchanged 157.451 million units worth N7.777 billion in 27,950 deals.
First Holdco, Zenith Bank, and Fidelity Bank were the busiest stocks for the five-day trading week, trading 1.745 billion units valued at N121.828 billion in 31,053 deals, contributing 47.85 per cent and 55.23 per cent to the total trading volume and value, respectively.
Business Post reports that 60 equities appreciated during the week versus 22 equities in the previous week, 28 shares depreciated versus 57 shares of the preceding week, and 58 stocks closed flat versus 67 stocks of the previous week.
International Breweries gained 40.00 per cent to trade at N13.30, RT Briscoe expanded by 32.02 per cent to N13.40, Livestock Feeds improved by 28.47 per cent to N9.25, First Holdco chalked up 25.82 per cent to close at N69.20, and Abbey Bank rose by 23.65 per cent to N9.15.
On the flip side, McNichols lost 28.57 per cent to finish at N5.00, Thomas Wyatt gave up 11.64 per cent to quote at N2.43, Geregu Power declined by 10.00 per cent to N825.70, CAP shed 9.99 per cent to settle at N157.60, and Guinness Nigeria also slipped by 9.99 per cent to N329.00.
Customs Street was under buying pressure last week, making the All-Share Index (ASI) and the market capitalisation close higher by 6.35 per cent to 243,798.76 points and N156.445 trillion, respectively.
In the same vein, all other indices finished higher apart from the growth and sovereign bond indices, which depreciated by 7.43 per cent and 0.02 per cent, respectively.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange rose by 2.30 per cent, spurring the NASD Security Index (NSI) to close higher by 96.61 points to 4,296.34 points from 4,199.73 points, and raising the market capitalisation by N57.99 billion to N2.578 trillion from N2.521 trillion.
The market was up yesterday despite a lower activity level, as the volume of securities traded slumped by 94.7 per cent to 1.3 million units from the previous 23.9 million units. The value of securities slipped by 57.2 per cent to N29.2 million from the preceding session’s N68.2 million, while the number of deals executed by market participants increased by 6.7 per cent to 32 deals from the 30 deals carried out on Thursday.
At the close of transactions, Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units valued at N6.5 billion in trades, and Central Securities Clearing System (CSCS) Plc with 70.8 million units traded for N4.9 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units sold for N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
During the trading day, there were three price gainers and two price losers, led by Afriland Properties Plc, which shed N1.48 to sell at N15.17 per share compared with the previous session’s N16.65 per share, and Food Concepts Plc, which slid by 7 Kobo to close at N2.69 per unit versus N2.76 per unit.
Conversely, FrieslandCampina Wamco Nigeria Plc improved its value by N9.50 to trade at N150.00 per share compared with Thursday’s closing price of N140.50 per share, CSCS Plc went up by N7.95 to N89.65 per unit from N81.70 per unit, and 11 Plc soared by N6.94 to N206.95 per share from N200.01 per share.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited lost its footing by 0.07 per cent on Friday as a result of renewed profit-taking by investors.
The fall happened after Thomas Wyatt and Guinness Nigeria led other price losers group comprising 27 stocks at the market yesterday due to selling pressure.
Thomas Wyatt Nigeria shed 10.00 per cent to quote at N2.70, Guinness Nigeria drowned by 9.99 per cent to close at N329.00, Ikeja Hotel slipped by 9.96 per cent to N42.50, Zichis shed 9.94 per cent to trade at N26.37, and McNichols depreciated by 9.91 per cent to N5.00.
On the flip side, International Breweries gained 9.92 per cent to finish at N13.30, NEM Insurance appreciated by 9.61 per cent to N27.95, Jaiz Bank grew by 6.36 per cent to N9.20, UPDC expanded by 6.33 per cent to N4.20, and Livestock Feeds increased by 6.32 per cent to N9.25.
Business Post reports that investor sentiment remained bullish despite the loss recorded during the session, as there were 27 price decliners and 30 price advancers, representing a positive market breadth index.
Yesterday, market participants transacted 441.3 million equities for N19.4 billion in 44,938 deals compared with the 1.7 billion equities worth N112.0 billion traded in 44,780 deals a day earlier. This showed that the trading volume contracted by 74.04 per cent, the trading value declined by 82.68 per cent, and an uptick in the number of deals by 0.35 per cent.
Access Holdings led the activity chart on Friday after selling 40.2 million shares valued at N1.0 billion, Sterling Holdco traded 30.3 million stocks worth N228.8 million, Fidelity Bank sold 26.3 million equities for N505.6 million, Zenith Bank transacted 22.3 million shares valued at N2.5 billion, and First Holdco exchanged 19.0 million stocks worth N1.3 billion.
During the last trading session of the week, the consumer goods sector rose by 0.49 per cent, the insurance counter increased by 0.06 per cent, and the industrial goods index closed flat, while the banking and energy indices lost 0.78 per cent and 0.52 per cent, respectively.
As a result, the All-Share Index (ASI) shrank by 159.97 points to 243,798.76 points from 243,958.73 points, and the market capitalisation moderated by N103 billion to N156.445 trillion from N156.548 trillion.
