At 6.03% Decline, Insurance Sector Emerges Worst NGX Performing Sector in 3 Months


As the Nigerian Exchange Limited (NGX) gained 9.95 per cent or N3.02trillion in first three months of 2022, indicator revealed that the NGX insurance index depreciated by 6.03per cent or N9.06 billion to emerged as one of the worst performing indices on the bourse.

On the flipside, data gathered from the NGX revealed that the NGX Oil & gas gained 27.7 per cent to outshine other indices on the exchange.

THISDAY had reported that the NGX All-Share Index or ASI went up by 6.03 per cent to close at 186.16 basis points from 198.11 basis points it opened in 2022

The mainboard of the NGX has 22 insurance companies with profit-taking by investors in heavy-weights such as NEM Insurance Plc, Coronation Insurance Plc, African Alliance Insurance Plc, and Mutual Benefits Assurance Plc stocks affecteting the index performances in the period under review.

The likes of Cornerstone Insurance Plc, Axa mansard Insurance Plc were the only stocks that appreciated in the months under review, as African Alliance Insurance Plc Goldlink Insurance Plc, Guinea Insurance Plc., International Energy Insurance Plc, Niger Insurance Plc, Staco Insurance Plc, Standard Alliance Insurance Plc, Universal Insurance Plc and Veritas Kapital Assurance Plc traded flat.

Despite weak corporate earnings, investors on the Exchange reacted to AXA Mansard dividend payout in 2021 financial year.

Despite recording a decline of 17 per cent in profit to N3.7billion from N4.5billion reported in 2020, AXA Mansard Insurance declared a dividend of 25k per N2.00k ordinary share.

Further analysis revealed that NEM Insurance despite declaring a decline of 12 per cent drop in profit before tax to N4.53 billion in 2020 from N5.13billion in 2019, announced final dividend of 22 kobo per N1.00 ordinary share.

Speaking on the investors ‘profit-taking in insurance companies, analyst at PAC Holdings, Mr. Wole Adeyeye said the decline in most insurance stocks has to do with mixed reactions trading by investors.

According to him: “Some investors reacted to the unimpressive financial performances of some listed companies while some engaged in profit-taking activities.

“Also, some investors reacted negatively to insurance companies that have not released their 2021 audited financial report.”

According to the Managing Director, ARM Securities Limited, Mr. Rotimi Olubi: “The current level of uncertainty in the insurance industry is not a good development for most players.

“Also, we have noted significant profit taking because valuations have outpaced market pricing. In our opinion, the combination of these factors alongside what the general uncertainties (Inflation and exchange rate volatility) bodes for household income makes for a not-so-attractive tickers in the insurance sector.”

Speaking, the Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said: “This is purely market dynamics, because since the recapitalization activities started in the sector, there have been improved buying interest as a result of anticipated mergers and acquisition in the industry which has created wealth for smart and discerning traders.

“The pullback in the sector index was as a profit taking during earnings season, due to the perception low payout and inconsistent dividend before the most of the players in the sector surprised the market with improving payout at the rush hour submission of corporate earnings to meet the statutory deadline.

“As the ongoing recapitalization and reforms insurance sector are expected to boost earnings performance in no distance time that will drive prices higher despite the volatile market and pre-election year uncertainty. For short to long term investment objective look the way of the sector and allow company fundamentals, earnings growth prospect and positive technical to guide your decision.”

Analysts have expressed that the hike in global oil prices was a major factor investor are buying into the Oil & gas stocks, stressing that the scarcity in the domestic market that led to price hike attracted investors’ interest in the sector.

The National Bureau of Statistic (NBS) disclosed that the average price paid by consumers for Premium Motor Spirit (petrol) increased by 0.04 per cent on year-on-year basis to N165.77 in December 2021 when compared to the valued in December 2020, which is N165.70.

Although the retail price of Automotive Gas Oil (Diesel) paid by consumers presently sells for N350 a litre and more in other states, as commodity increased by 28.97 per cent on a year-on-year basis from a lower cost of N224.37 per litre recorded in November of last year to a higher cost of N289.37 per litre in December 2021.

According to the CBN, daily crude oil price has gained 49 per cent to close as of March at $119.06 per barrel from $80.07 per barrel it opened in 2022.

The key driver in the Oil & gas index was Seplat petroleum Plc that bounced back in its corporate earnings. The indigenous oil & gas company stock price appreciated by N280 or 43.08 per cent to close as of March 31, 2022 at N980 from N650 it opened for trading in 2022.

The company had reported profit before tax of N71.03billion in 2021 FY as against a loss of N28.87billion reported in 2020, while profit after tax closed 2021 at N46.93 billion from a loss of N30.71billion.

The management proposed a dividend of a final dividend $0.025 for the second consecutive year.

Commenting on the Oil & gas index performance Olubi added that: “The NGX Oil & Gas index has grown 24.08per cent YtD, mirroring the 43.08per cent YtD growth on Seplat.

“As crude oil prices trade above USD105pb, bullish sentiment remains on the upstream oil and gas company with the counter now trading at N930.00 per share.

“Other gainers within the NGX Oil & Gas index include Oando and Total gains of 8.37per cent and 7.48per cent YtD, respectively. On the flipside, Ardova, and MRS both recorded losses 10.98per cent and 1.21 per cent YtD respectively.”

Group Head, Research & Business Intelligence, GTI Capital Limited, Mr Emmanuel Onoja said: “Oil & Gas gains has been driven by the uptick in crude oil and natural gas prices.

“Notably, the global oil benchmark (Brent) rose by 26.93per cent in Q1’2022 to close in March at $104.71 per barrel, while the Nigeria oil (Bonny Light) surged by 33.2per cent to close at $109.45 per barrel.

“This we believe led to an upsurge in revenue of the Oil & Gas companies as Nigeria continued to struggle to meet the OPEC production quota.”

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