The Nigerian Insurance Sector is often regarded as the most under-performing in the financial sector, especially if you compare it to other insurance sectors across the world. At a combined market capitalization of about N146 billion it pales in comparison to the banking sector, with a market capitalization of N2.4 trillion.
Despite this seemingly low market, it is important to identify which insurance companies are the largest in terms of total assets, profits, insurance liabilities etc.
In our latest version of sector ranking for publicly quoted companies on the insurance sector, we will analyse which insurance companies dominate in some of the most important metrics investors like to look out for. Those who do not invest in the insurance sector but buy insurance should also find this analysis useful. Let’s dive in..
Ranking as at September 30th 2017
In this list, we rank the following Insurance Companies, AIICO, Connerstone Insurance Plc, Contnental Reinsurance, Custodian and Allied Insurance, Axa Mansard, NEM, Niger Insurance and WAPIC. They are all quoted companies and by far the largest in the sector full of much smaller players. This ranking also excludes Privately owned insurance companies such as Old Mutual, Leadway Insurance, Ensure Etc.
Balance sheet size
This represents the summation of a company’s fixed assets, cash balance, investments, debtors, inventory and any other asset a company has in its disposal to run a business. It is often described as the single determinant of how large a corporation is, at least based on book value. While a company may have a larger balance sheet size, it may have a low market value. The market value is the price investors are willing to pay for a company, while the balance sheet size is the nominal value of the assets the company has at its disposal.
For Insurance companies, the balance sheet size is important as it shows that they are able to carry out major risk. Since insurance is all about taking risk, companies who wish to insure their most significant asset will often prefer those with large balance sheet sizes.
As at September 2017, the Insurance Company with the largest balance sheet size is AIICO. With a balance sheet size of N83.9 billion it is the largest insurance company quoted on the Nigerian Stock Exchange. This is not a surprise, considering how long it has been in operations. Custodian and Allied Insurance follows closely with about N80 billion. The least is NEM Insurance with just N16.5 billion. Total Balance Sheet size for the companies is N333.9 billion.
Net Assets represents the value of total equity owned by the shareholders of a company. It represents the amount they invested in owning shares in the company plus net all the profits and losses they have declared over the years. As at September 2017, the total net assets of these companies was N121.4 billion. Topping the list was Custodian and Allied Insurance with N33.1 billion. Following closely is Mansard with N22.2 billion. Axa Mansard, appears to have pipped Continental Reinsurance to second place, a position the latter had in 2016. AIICO, which topped the list for balance sheet size has just N8.8 billion in Net Assets. AIICO has had a rough couple of years, posting mega losses due to its poor asset quality.
Gross Premium Income
This is perhaps one of the most important indices tracked by insurance companies in Nigeria. It represents the total amount insurance companies collected from their customers within a calendar year. This metric tells us which insurance company has the largest market share in terms of driving up premiums. From out assessment, Custodian and Allied Insurance tops the chart with a total of N27 billion in gross premium, this year so far. This about 23% of the total gross premium earned by the companies under review. Following Custodian and Allied Insurance is Mansard with N19.6 billion in gross premium. AIICO is third with N17.5 billion.
Net Premium Income
While gross premium income represents the total premium collected during a period, net premium income represents the income that is earned within the same period. Because insurance companies enter contract at any time during the year, accounting principles require that they only record as Net Premium, premiums that accrue for the calendar year. For example, the total amount of net premium collected between January and September 2017 is N67.6 billion. This means only N67.6 billion was actually earned for contracts between January and September 2017. AIICO tops this list with N14.5 billion suggesting that most of their contracts are within the calendar year. Important to add that Custodian and Allied Insurance did not report Net Premium Income.
This represents the total amount an insurance company pays its customer whenever there is a damage, theft, loss of property etc. Insurance companies that pay claims promptly is a sign that they have a strong balance sheet. However, insurance companies that pay a lot of claims might also mean that they are poor at marketing customers will low claims ratio. A total of N40 billion net claims were paid out in the sector in the first 9 months of this year. AIICO topped the list with claims of about N14.9 billion. Mansard was a distant second with about N6.7 billion in net claims. NEM Insurance paid the lowest claims for the period under review.
This is also a very important metric and shows which insurance company is making a profit from its premiums. Since insurance companies make money when claims are less than premiums, underwriting profits represents that difference. Interestingly, NEM Insurance tops the list with N3.4 billion in Underwriting Profits. The next was Custodian and Allied Insurance with N2.2 billion. Connerstone and AIICO both reported Underwriting losses. Interestingly, AIICO was tops last year with N5.3 billion.
Net Profits as it is with every company shows if a company made profit in any period under review. In the Insurance Sector, this will include, profits made from investments plus underwriting profits. Custodian & Allied Insurance tops with about N5 billion, followed by Axa Mansard at N2.8 billion for the period under review. Total profits made this year so far is about N17.5 billion compared to N17.6 billion same period in 2016.
Returns on Equity
Perhaps the most important measure, ROE determines which company made the most of their shareholders funds. AIICO surprisingly tops the chart here with about 29%, largely due to their smaller net assets. AIICO has had to wipe out a lot of its equity due to periodic losses. Next is Continental Reinsurance at 23%, while Custodian and Allied Insurance are next with 16% and 15% respectively. Returns for the Insurance sector is weak in our view coming at a combined 15%, lower than the average One year Treasury Bills yield.
Based on the above, it appears Custodian and Allied Insurance is the largest Insurance Company quoted on the Nigerian Stock Exchange. It leads the market share in terms of Gross Premium and Net Assets. AIICO with the largest balance sheet size, falls short in terms of net assets. However, it is the best in terms of returns on equity. But despite having a huge balance sheet, it is only able to return 3% on its assets.
View our interactive table for the data.