Investors worry over stagnation in prices of insurance stocks-By Izuegbu Nkechi Gift

   

   Worried about the free fall in the shares of insurance companies on the nation’s bourse, capital market investors have stressed the need for the industry regulator, and professional bodies to intensify efforts at mitigating the challenges causing the sub-optimal performance of the sector in Nigeria.

     The investors, who expressed dismay on the level at which their investment depreciates in value on the Nigerian Stock Exchange (NSE), called for a review of some laws regulating the affairs of the industry.

     According to them, a holistic review of industry laws as well as devising new ways to approach insurance in Nigeria, would enhance optimum efficiency in operations of the practitioners and forestall further stagnation in their share prices

  At the end of last week’s transactions, five insurance stocks recorded price depreciation. Specifically, Sovereign Trust Insurance led the losers’ chart with 20.83 per cent to close at N0.38 per share. Unic Diversified Holdings followed with 18.52 per cent to close at N0.22 per share.

     African Alliance Insurance shed 14.23 per cent to close at N0.36 per share. Royal Exchange dropped 11.43 per cent to close at N0.31 per share. Standard Alliance also lost 8.33 per cent to close at N0.44 per share.

     Furthermore, the investors argued that many listed insurance companies have poor corporate governance structures, noting that this poor management translates to non-payment of dividends mostly due to negative retained earnings.

    The insurance stocks capitalisation on the NSE dropped N6billion within a month following the implementation of the new pricing methodology.

     The NSE, on January 29, began the implementation of the one kobo rule from an initial floor of 50 kobo per share, meaning stocks can now trade at a minimum of one kobo per share.

    The new pricing rule will see the prices of over one third of the quoted companies falling to as low as one kobo after the initial floor price of 50 kobo was removed.

     The insurance stocks trading below 50 kobo are African Alliance Insurance, Cornerstone Insurance, Equity Assurance, Goldlink Insurance, Guinea Insurance, Consolidated Hallmark Insurance, Lasaco Insurance.

 

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    Others are Mutual Benefit Insurance, Niger Insurance, Prestige Assurance, Regency Assurance, Sovereign Trust Assurance, Standard Trust Assurance, Standard Alliance Insurance, Unic Diversified Holdings, and Unity Kapital Assurance.
      Despite its importance for economic development, the gross premium collected by insurance companies in Nigeria is about $1.9billion compared to the $3.8billion collected in South Africa.