As the equity market continues to perform well, the insurance sub-sector of the financial sector has remained relatively stagnant. Unlike other sub-sectors, insurance companies have not appreciated in value and a large percentage of them are trading below their nominal prices of 50 kobo.
Performance in the sector has been poor, as evidenced by the insurance index ranking lowest among sub-sector indexes. According to an index table released by the Nigerian Stock Exchange as of December 30th, 2022, the NGX Insurance Index, which had an opening value of 198.11 index points on January 4th, 2022, closed the year lower at 174.36 index points, representing a drop of 12%.
However, some market analysts believe there is still hope for the insurance sub-sector. They believe that some companies that have remained strong in terms of capital and consistent in dividend payments offer investment opportunities for savvy investors.
These analysts recommend dividend-paying stocks in the insurance sub-sector such as NEM Insurance, Lasaco Assurance, AXA-Mansard Assurance, Coronation Insurance, and AIICO Insurance as potential investments with good fundamentals and a chance for share appreciation in the near future.
They also noted that the current low share prices make these stocks an attractive buying opportunity for investors looking to accumulate them and reap bigger dividends in the future.
Mr. Mike Eze, the Managing Director of Crane Securities Limited, in a chat with Nairametrics said some insurance stocks were ripe for investment going by their stability of capital and dividend pay-out.
- Eze noted that it was obvious that activities would stabilise in the market after the general elections, adding that this was the perfect opportunity for investors to stake their funds in the insurance stocks. “This is the right time for investors to take part in the equities market, with the prices of shares at their low levels. Brokers are confident that after the elections, the market would begin to stabilise and investors would begin to record significant appreciation on their investments.
- Stocks such as NEM Insurance, Lasaco Assurance, Mansard Assurance and Coronation Insurance are good to buy at this period because they are stable in dividend payment and have the tendency for capital gain in near future.
- “Because with the little amount of funds you will buy a large quantities of low-price insurance stocks, and that enhances your position as a shareholder. If dividends are declared by such companies, the shareholder will earn a sumptuous dividends.
Mr. David Adonri, Executive Vice Chairman, of Hicap Securities Limited said that generally, it is a good time to buy insurance stocks that have good fundamentals and potential.
Adonri said that there are some insurance stocks that have good potential and pay dividends consistently.
- “Companies that are profitable with good prospects include AXA-Mansard Assurance, AIICO Insurance, NEM Insurance, and Coronation Insurance. These companies are good stocks to buy, they are profitable, their earnings are good and their prices are not bad.
- “If they must buy insurance stocks, the same rule should apply. Stocks with strong fundamentals are always able to weather the storms. And when the bulls return, fundamentally sound stocks tend to lead the recovery. It is also important to consider the long-term horizon when investing in stocks, especially at this difficult time.
- “For good prospects and long-term appreciation, investors are advised to buy or hold those insurance stocks, these stocks are more stable than other volatile stocks in the sector. I prefer these stocks because they are consistent in dividend payments. But anybody that is buying stocks generally now should look at benefits in long run,” he said.
He noted that investors are wiser now adding that they use parameters of fundamental analysis to arrive at investment decisions.
- “They look at the earnings per share, and dividend payout to determine the shares to buy and hold.
- To invest profitably in this changing environment, you need investment education, trading plans, and trading tools/software. These will help manage risk associated with volatility and unstable markets,” he said.
