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Nigeria Insurers’ stock prices and profits are hitting record highs, thanks in part to steep rate hikes, which signals that shareholders may be paid bumper dividends as there has been an increase in demand for policy underwriting across risk classes in the domestic economy.
The shares of companies have gained so far this year as investors are impressed with their financial performance. Most of them have outperformed the NGXASI index.
Cornerstone Insurance has a year to date (YTD) return of 123.25 percent; Custodian Investment, 57.78 percent; Guinea Insurance, 110.34 percent; Lasaco Insurance,34.21 percent; Linkage Assurance, 15.564 percent; AXA Mansard, 36.91 percent Mutual Benefit, 15.09 percent; NEM Insurance 73.02 percent, Sovereign Trust, 102.38 percent; SUNU, 454.55 percent; Universal Insurance Plc, 38.46 percent, and AIICO, 1.58 percent.
The NGXASI index has returned 32.09 percent so far this year.
It is important to note that quoted insurers’ combined profit surged by 186.63 percent to N158.06 billion in September 2024 from N55.14 billion as at September 2023, according to data gathered by MoneyCentral.
Big rate increases by the central bank who seek to tame rising inflation are driving up earnings even amid the deteriorating effect of the rising inflation rate which resulted in higher claims particularly in the non-life business.
The central bank had raised the Monetary Policy Rate (MPR) to 27.50 per cent from 27.25 per cent as part of efforts to combat surging inflation.
As a result of currency depreciation, soaring diesel prices, and escalating input costs, Nigeria’s inflation rate reached 33.88 per cent in October 2024.
There has been a marked improvement in the awareness of the usefulness of taking up a cover while transformative regulations have added strength to premium income, but the country’s low insurance penetration compared to some peer rivals in Africa means the sector is at its embryonic stage.
Analysts at Afrinvest Research said that the Covid-19 pandemic unlocked digital transformation across the underwriting value chain.
“Hence, we expect Nigerian insurers to step up digital transformation drive to capture untapped value at the retail end. Also, we anticipate that insurers would leverage NAICOM’s initiatives (such as web aggregators, bancassurance, and microinsurance) to increase collaboration with telecommunication companies, banks, and fintech platforms,’’ said analysts at Afrinvest Research.
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