Capital market investors who are worried about the free fall in insurance stocks prices on the Nigerian Stock Exchange have called on the regulators of the market to take action towards mitigating the problems that are responsible for the sub-optimal performance in the sector.
Expressing dismay over how their investments steadily depreciate in value on the Nigerian Stock Exchange, the stakeholders stressed the need for all the regulatory agencies to immediately review some of the laws and practices that are responsible.
Asides reviewing industry laws, they also called for new approaches to be devised in order to enhance optimum efficiency and forestall further stagnation in their share prices.
It should be noted that the sector’s capitalisation has dipped ₦60 billion in just one month.
Last week, five insurance stocks recorded depreciations after transactions. Sovereign Trust Insurance led the losers’ table with 20.83% to close at N0.38 per share. Unic Diversified Holdings followed in the losing streak with 18.52% and closed at ₦0.22 per share.
Also among the top losers are African Alliance Insurance which lost 14.23 % and closed at ₦0.36 per share. Royal Exchange dropped 11.43% to close at ₦0.31 per share while Standard Alliance also lost 8 .33% and closed at ₦0.44 per share.
Cause of the decline
The insurance stocks capitalisation on the Nigerian Stock Exchange is said to have dropped by ₦60 million within the month of February in the aftermath of the implementation of a new pricing methodology.
The Nigerian Stock Exchange commenced implementation of the one kobo rule on January 29, 2018, from an initial floor of 50 kobo per share. What this means is that stocks can now trade at a minimum of one kobo per share.
This new pricing rule is responsible for the recorded decline in stocks prices of nearly one-third of the quoted companies who now trade at one kobo as against the initial floor price of 50 Kobe.
Some of the insurance stocks that now trade below 50 kobo include Equity Assurance, Goldlink Insurance, African Alliance and Cornerstone Insurance. others are- Guinea Insurance, Consolidated Hallmark Insurance, Lassaco Insurance and Mutual Benefit Insurance.
Sir Sunny Nwosu, founder of the Independence Shareholders Association of Nigeria reacted to this development in a telephone interview with The Guardian, while maintaining that insurance regulators must find a way to resolve the problems militating against success in the insurance sector.
The regulators and management of these insurance companies must find out what is happening. They have their financials; they should know what is happening, whether it is the balance sheet that is dragging them back or debt issue or lack of research and development. They should not fold their hands and watch them. -Sunny Nwosu
The Nigerian insurance industry is one of the most under-performing industries in the country with the gross premium of $1.9 billion it generates. It contributes only 0.73.4% to the Nigerian GDP compared to its counterparts in Kenya and South Africa which account for 17% and 3.4% of those countries’ GDPs; respectively.
This is despite its immense growth opportunities, and the fact that it is highly important in the quest to ensure national development.
Despite its importance for economic development, the gross premium collected by insurance companies in Nigeria is about $1 .9 billion compared to the $ 3. 8billion collected in South Africa .