14 most liquid insurers in Nigeria, Africa’s most populous nation and oil producer have enough capital to take on more risk as shareholders fund continues to improve amid a volatile and tough operating environment.
This means there are no threats to the going concerns of these firms as their directors continue to maximize and add to shareholders value.
The cumulative shareholders’ funds of the 14 insurers that have released half-year results had risen by 7 percent to reach N140.06 billion at the end of June 2017.
All the 14 firms have a shareholders fund higher than the N3 billion capital requirement set by the National Insurance Commission (NAICOM).
NEM Insurance’s shareholders’ fund spiked by 16 percent to N8.25 billion as net income increased by 11 percent to N1.24 billion as at June 2017.
Law Union and Rock Insurance’s shareholders’ fund surged by 27 percent to N6.0 billion in the period under review as half-year net income was up 4 percent to N318.75 million.
Standard Alliance Insurance’s total equity increased by 14 percent to N5.29 billion despite negative retained earnings of N13.56 billion as the firm posted net income of N379.76 million, from a loss position of N311.41 million.
Linkage Assurance’s shareholders fund was up 13 percent to N19.04 billion in the period under review as net income surged by 234 percent to N2.51 billion as at June 2017.
Analysts say Nigeria’s insurance industry is undercapitalized, fragmented and too small to take on large risks.
Similarly, NAICOM has said that consolidation in the insurance industry is inevitable given the weak capital base of some firms operating in the industry.
Some insurers are raising funds from the capital market to strengthening their balance sheet and finance future expansion plans.
Consolidated Hallmark Insurance Plc is set to raise N500 million from the capital market to boost its operations.
According to the firm, the capital to be raised will be used to finance the acquisition of a Life Insurance Company, after the deduction of the estimated Issue costs and expenses of N15,715,429 (representing 3.14 percent of the Issue proceeds), the net issue proceeds of N484,284,571 will be utilized.In spite of the volatile and tough operating environment insurers operate in, the Director General of NAICOM, Abba Kyari says there are indications that the insurance industry’s gross written premium for this year could climb over N400 billion as against the N320 billion recorded in 2016.
While the 14 firms under our coverage have shown strength in terms of a solid capital base, rising claims and underwriting expenses have continued to pressure margins as continued to damp efficiency.
The cumulative return on equity (ROE) of the 14 firms was flat at 7.46 percent while the combined net income dipped by 4.33 percent to N12.51 billion.
BALA AUGIE
