INDUSTRY WATCH- INSURANCE SECTOR

INDUSTRY WATCH- INSURANCE

Let us take a look at the insurance sector on the Nigerian Stock Exchange, a sector that is not only in the shadow of itself but also lagging behind. The sector contributes less than 5% to the total Market capitalization of the Nigerian capital market despite having the highest number of companies under its domain. The sector in a general view consists of about thirty companies. However in order to make them comparable I grouped the companies into two.

Group A consist mostly of Insurance companies that seldomly move or change in price. Everything about most of these companies is .50k. Their current Price is .50k, their 52Wks high is .50k 52wks low is .50k.  Above all most of these companies do not have any 2013 quarters result to work on. Companies in Group are listed below-

                                               

Group B thus consists of insurance companies that are liquid and has price volatility. A comparative look at the companies in this group is shown below-

International Energy Insurance and Wapic which should be included were not included due to unavailable 2013 quarters result.

                                                    A look at the Gross premium (Total Income) and PAT of each Company

                                                       The amount each company is generation per each unit of shares.

                                                        The Profit Margin of each firm.

                                           The earnings each company retained per each unit of shares.

                                                                      The price to earnings ratio of each firm.

                                                                             The Return on Equity of each firm.

                                              Current Price of each company against their Book Value.

                                                  Price to book value of each company.

                     Technical comparison of each company based on Current price, 52weeks high and 52weeks low.

INFERENCES

AIICO- The numbers of Aiico is not looking excellent, the company had a 57% Q3 QoQ drop in PAT which accounts for it having the lowest profit Margin in the group.

CONTINENTAL INSURANCE- The current numbers it possesses makes it current price expensive.

   

 CUSTODIAN & ALLIED- The numbers of Custodian look good but its share price is already close to its 52wksH which makes me doubt a possible rise in its share price in the short term

CONERSTONE- The PE of cornerstone insurance looks a little on the high side and other ratios are not really encouraging but putting into consideration that this company move from QoQ pat of 2012 PAT of (71m) to a 2013 PAT of 416m makes it a company to put on a watch list.

LAW UNION –The numbers of Law Union also makes it a company to put on the watch list, the company was also able to move from a negative PAT to a positive PAT on a QoQ basis

MANSARD- Formerly GT Assurance, it’s a company that is selling at a premium due to the values it has created for itself, from effective management to duly rewarding investors with interim and final dividend year in year out. Appeared expensive yet I will not be surprised if the stock sell at N3 in the medium term. The company made a 51% increase in it PAT on a Q3 QoQ basis.

NEM- My feeling about NEM can be deduced from my tweet about it some days ago

Owolabi Afeez  @1himself Jan17 How I wish #NEM isn't in d #Insurance sector.EPS-.39k FEPS-.52k RVS-1.2 PE-2.1 FPE-1.5 BV-1.2 PBV-.69 ROE-33% PatM-32% can u beat that? #NSE

NEM is the stock with the lowest PE in the insurance sector and in the entire Nigeria Stock Market.

PRESTIGE- Prestige numbers looks good.

ROYALEX- Royalex numbers looks attractive.

Conclusion.

                I have been in the market for a few  years now and I know the general apathy towards the insurance sector due to some valid reasons (Cooperate governance issues, lateness of releasing of result, releasing of Year end result that will not be in line with released quarter result and so on). I however vehemently feel they are Companies in this same sector with bargains that are too strong to be ignored. I will advise a pick of one or two out of the entire sector which should then be looked into critically for a possible BUY consideration.

BEST OF LUCK AND HAPPY INVESTING…

NOTE-

The groupings was only done to make this write-up easy for me, it doesn’t segregate any of the company as good or bad.

NEM forms a big portion of my portfolio so any of my biased appraisal of it should be adequately ignored.

The Inferences are based on my personal feelings and adjudication of each company. It therefore should not be solely used in making any investment decision 

Critiques, Comments, Advise and Questions will positively received.

owolabiafeez@hotmail.com

Twitter- @1himself

ADDENDUM- I have an uncontrollable urge to dedicate this to Nigeria Most UNIQUE investor PETER IYEN who we all felt was out of sense when he laid so much emphasis on the insurance sector. He his really a mentor that i learn from even if we both dont concur most times.

Peter Iyen is on on twitter via- @nse_investor . His blog is full of interesting and eyes-opening write-ups, visit http://www.globalnigerian.com