Published On: Mon, Feb 19th, 2018

Massive sell-off hits insurance sector

 

 

FELIX OLOYEDE

As the Nigerian Stock Exchange (NSE) changes its rules about the maximum price that stocks could dip below their nominal book values of 50 kobo per share, Insurance sector stocks since last week have taken a free fall. David Adonrin, managing director, Highcap Securities Ltd has been holding Royal Exchange Insurance stocks for more than three years without finding investors willing to buy them at its N0.50 par value. But when The NSE introduced the new par value rules that allow  stocks to decline to as low as N0.10 on January 29, 2018, it took him less than an hour to sell the Royal Exchange Insurance stocks when it dropped to N0.48.

Other investors like Adonrin have latched on to the new par value rule to sell-off a trailer load of insurance sector stocks in their portfolios, causing the sector to decline by -1.65 per cent in less than three weeks. 46 per cent of the listed insurance companies currently trade below their former N0.50 par value with Consolidated Hallmark Insurance being the worst hit, losing -46 per cent of its value year-on-year to close at N0.27 on Friday. Only Japaul (N0.36); FTN Cocoa Processors (N0.44); First Aluminum Nigeria (N0.37); Chams (N0.48) and Multiverse (N0.35) were the companies outside the insurance sector that fell below N0.50.

The insurance sector was down -0.45 per cent on Friday to close the week at 154.24 point with Linkage Assurance topping the volume chart, selling 300.77 million of its share worth N246.80 million. The sector declined -2.66 per cent last week. However, it has grown 10.67 per cent year-to-date, trailing the performance of the equity market, which appreciated 11.40 per cent year-to-date.

“A lot of the insurance companies lack the fundamentals to trade at N0.50 per value that is why we are seeing  investors pricing them down now,” explained Akintoye Ayorinde, analyst, Research and Securities, Afrinvest (W/A) Ltd. He maintained that the Federal Government would need to step in to help the insurance sector by enforcing compulsory insurance policies.

The law of demand and supply was taking its toll on the insurance sector since the per value was review downward, posited Adonrin. “There many people willing to sell; while there few who are ready to buy that is what is playing out. This would continue until equilibrium price is achieved,” the Highcap Securities bossed further elaborated.

“Those with good fundamentals have appreciated while those with poor fundamentals have dropped further,” noted Johnson Chukwu, managing director, Cowry Asset Management Company Ltd. But he argued that the industry has not performed badly year-to-date, having grown 10.67 per cent during this period.

NEM Insurance has brazed the trail in the industry in the last one year as its stock price has 140.74 per cent y-o-y to N1.95 on Friday. It was followed by Mansard Insurance (N2.65) and Continental Reinsurance ((N1.48), which appreciated 76.67 per cent and 40.95 per cent y-o-y respectively.

“With the way the economy is structured, people are not ready for insurance. Even the compulsory insurance policies are not being enforced. People look at the sector as downtrodden,” claimed Olusola Senbanjo, managing director, Mc Alfa Global Insurance Brokers Ltd. He opined that the insurance sector is not being harnessed a major driver of the economy, urging other states to take a cue from Lagos State which has resolved to insurance the lives of policemen working in the state.

He added that efforts are being made to revamp the industry as NAICOM has been ensuring sanity in the sector. “We are expecting the assistance of the Federal government in driving the compulsory insurance,” the insurance broker submitted.

After slumping for eight consecutive days, the equity market rallied three days in a row to close last week appreciating 0.08 per cent to 42,638.83 points, on the back on gains recorded in medium and large capitalized stocks. Nestle led the nine gainers who pulled the market up on Friday, rising N55.00 or 4.09 per cent to close N1, 400.00. Nascon (N1.00) and Transcohot (N0.35) were part of the top three advancers for day, increasing 5 per cent and 4.86 per cent respectively.

On the other hand, CAP was top among the 30 losers for the day, dropping -4.60 per cent or -N1.70 to berth at N35.2. Nigerian Breweries (N131.00) also shed -0.30 per cent or -N0.40, while Access Bank (N12.60); ETI (N19.75) and UBA (N12.15) were the other top losers, down by -0.30 per cent, -2.33 per cent, -1.25 per cent and -1.62 per cent.

The market capitalization advanced 0.08 per cent to N15.30 trillion as the 815,854,788 stocks traded in 4,808 deals amounting N8.06 billion.

Investors traded a total of 2.940 billion shares stocks worth N27.924 billion in 28,570 last week, though this was -34 per cent lesser  than 4.426 billion equities valued at N24.236 billion that exchanged hands in 29,573 deals the previous week.

“The Financial Services Industry (measured by volume) led the activity chart with 2.174 billion shares valued at N17.033 billion traded in 19,013 deals; thus contributing 73.96% and 61.00% to the total equity turnover volume and value respectively. The Services Industry followed with 232.482 million shares worth N216.990 million in 734 deals. The third place was occupied by Conglomerates Industry with a turnover of 170.422 million shares worth N499.400 million in 1,578 deals,” the exchanged stated in its weekly report.

The Nigerian capital market’s 11.40 per cent year-to-date return makes it is the best performed exchange during this period globally and only second to the Mongolian exchange, appreciating 79.92 per cent y-0-y. It was ranked the 11th best performed market in 2017 after posting 42 per cent return last year.

© 2018, Hallmarknews. All rights reserved. Reference and link to this site is required if you wish to reuse any article.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • MPC retains interest rate at 14% for 13th consecutive times

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria on Tuesday for the retained the Monetary Policy Rate unchanged at 14 per cent for the 13th time. The CBN Governor, Mr. Godwin Emefiele, announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in […]

  • 2018 budget: FG to sell 10 state-owned companies to raise funds

    The Federal Government may put up 10 state-owned companies for sale in the fourth quarter of 2018 to raise N289 billion for the funding of the 2018 budget, Joe Anichebe, a director at the Bureau of Public Entreprises (BPE), has disclosed. Anichebe said preparations are in the final stages for the sales of the companies, […]

  • FG to sell 10 public assets in Q4 2018

    The Federal Government has concluded plans to sell 10 government-owned companies for sale to selected investors and the public in the fourth quarter to raise N289 billion toward funding the 2018 budget,Bureau of Public Entreprises (BPE) has disclosed. According to Bloomberg report, preparations are in the final stages to begin the sale of the companies […]

  • Modric defeats Ronaldo, Salah to emerge FIFA’s Footballer of the Year 2018

    Real Madrid and Croatia midfielder Luka Modric has been named the Best Men’s Player at The Best FIFA Football Awards on Monday evening, fighting off competition from fellow nominees Cristiano Ronaldo and Mohamed Salah. The award caps off an incredible year for Modric, who won his fourth Champions League title with Real Madrid in May, […]

  • Nigerian bond market witnesses low demand

    A slowdown in client demand characterizes the bond market on Monday, unlike sentiments witnessed for the most part of last week. This is on the back of expected renewed supply at the bond auction on Wednesday, where the Debt Management Office (DMO) would raise a total of N90billion from the 2023, 2025 and 2028 maturities. […]

  • Oil price climbs to four-year high as Saudi, Russia turn Trump down

    Oil prices have hit a four-year high of over $81 a barrel after Saudi Arabia and Russia rejected calls by Donald Trump to increase production. Brent crude hit its highest level since November 2014 at $81.16 a barrel, up 3 per cent on the day. Saudi Arabia led the c oil cartel, while Russia is […]

  • Buhari releases N22bn to Nigerian Airways retirees

    The Federal Government has released N22.68 billion to settle part of the retirement benefits of former workers of the defunct Nigeria Airways. The government has also approved the release of N20 billion to revitalise public universities in line with demands of the Academic Staff of Universities (ASUU). Minister of Finance, Zainab Ahmed, made the disclosure […]

  • MPC set for another policy freeze

    By FELIX OLOYEDE Despite the outcry for lower domestic interest rates, the Monetary Policy Committee (MPC) is expected to leave the Monetary Policy Rate (MPR) at 14 per cent as it responds to inflation jitters ahead of the 2019 general elections, say economists. The MPC meeting schedule to hold today, Monday 24th 2018 and Tuesday […]

  • Ambode fights for his political life

    By OBINNA EZUGWU It is no longer news; the political love affair in Lagos state is in trouble. For the first time since 1999, a sitting governor is facing a real challenge from his own party for the ticket. The indignity can only be imagined and its implications continue to reverberate across the state and […]

  • Adeosun: Betrayed by a dysfunctional system (Editorial)

    A fortnight ago, former Finance Minister Mrs. Kemi Adeosun, resigned her position following the report of an investigative panel into allegations of NYSC certificate forgery against her. The allegation had been earlier made by an online newspaper, Premium Times, and the nation was agog with speculations about it. Her resignation has been interpreted by most […]

  • High cost of Nomination Forms: A conspiracy against the youths

    From PETER OKORE, Umuahia Amidst the mixed feelings trailing the high cost of Nomination Forms for interested candidates to participate in the 2019 general elections, there is growing consensus for the electorate should go for credible candidates rather than political parties in order to achieve desired results. This is because since some political parties in the […]

  • Govt bottlenecks still inhibiting agric business– Farmfields CEO

    Mr. Zanau Hassan Maikasuwa is the CEO of Farmfields Agro-allied Services, an agro-allied consulting and supply firm located in Jalingo, Taraba State. He is an ardent agricultural expert and a strong believer of improving agricultural methods for an improved and more rewarding agricultural sector in Nigeria. In this interview with BLESSING PETER, he assessed the […]

  • China and Nigeria’s debt burden

    By AYOOLA OLAOLUWA Experts have raised the alarm over the continued foray of Chinese businesses and massive funds into Nigeria, saying it portend danger for the country. They argued that the nation risk falling into debt trap, joblessness, among other costs, as is being experienced by several Africans countries. Available data indicate that apart from the […]

  • New Banks fight for survival 

    By OKEY ONYENWEAKU A clutch of new financial institutions are beginning to slowly appear on Nigeria’s banking scene as the once fragile economy wriggles out of a recession that held sway between the middle of 2015 and the second quarter of 2017. The renewed institutional confidence in the economy (which has grown more recently at […]

  • Gov poll: Stalemate in Osun as APC, PDP live to fight another day

    The Independent National Electoral Commission on Sunday declared the Osun State governorship election inconclusive. The candidate of the Peoples Democratic Party, Ademola Adeleke, had polled 254,698 votes against that of the All Progressives Congress, Gboyega Oyetola, who polled 254,345 votes. However, due to irregularities which marred the election at some polling units in Ife North, […]

  • Ambode fights for his political life

    By OBINNA EZUGWU It is no longer news; the political love affair in Lagos state is in trouble. For the first time since 1999, a sitting governor is facing a real challenge from his own party for the ticket. The indignity can only be imagined and its implications continue to reverberate across the state and […]