Last week was a particularly impressive week for the Insurance Sector returning about 5.8% at the end of the week. Mansard led the gainers chart with 18% and was joined Royal Exchange Assurance 12% and Continental Re-Insurance 12%. This was quite remarkable when you consider that other indexes and the All Share Index all lost. In fact, most blue chip stocks hit their year lows last week as the bears spilled blood. It appears the Insurance sector has finally started attracting the right attention after going for years unnoticed. They have mainly been bogged down by regulatory issues, late filing of their results and adoption of IFRS. They also faced distrust from investors regarding corporate governance and ability to face up to the challenged of a modern financial services industry.
It appears things are looking to change as their previously low market capitalization appears to be attracting the pockets of investors. Several foreign investors are looking at the companies for potential takeovers and acquisitions. Nigeria is the largest economy in Africa and businesses will surely need the services of strong and well capitalized insurance companies to help take on risk for business growth. The insurance sector makes up about 0.9% of the entire Nigerian Stock Exchange and is just worth about N163.4billion. To put it into better perspective, all of them combined is not worth up to 10% of Dangote Cement (N2.89trillion).
For investors, I think the key thing is to look at some of this companies carefully and seek out the ones that are worth investing in. Mansard, Custodian and Allied Insurance, Continental Reinsurance, AIICO, WAPIC, Mutual Benefit all look like potential stocks to own. However, I will like to see their 2014 FY results before making any move.