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The value of Great Nigeria Insurance (GNI) has arisen immediately after a buyout that showed the composite underwriting firm’s share price spike by 126 percent to N1.13 from N0.50 previously held.
This means the new market value of the firm is N4.13 billion, from N1.91 billion, before its owners sold stake in the company.
Analysts are of the view that recent buyout shows the insurance industry has a higher valuation despite a weak balance sheet and stagnated stock price.
“That shows these companies could be trading higher and there are room for investors to swoop on the shares of these firms,” said an industry expert who doesn’t want his name mentioned because of the sensitivity of the matter.
He added, “It is expected that the new owners will inject more capital into the business and this will enhance capital base and strengthen balance sheet for better performance,”
Wema Bank Plc has sold its majority equity stake of 75 percent in the 56 years old GNI Plc to Insurance Resourcery and Consultancy Services Limited, a relatively unknown firm.
The divestment is valued at N3.24 billion, while a total of 2.87 billion 50k ordinary shares of GNI were transferred to the core investor, one of the best deals of the year.
GNI is in urgent need of new owners given its receding revenues, rising combined ratios, recurring loses and weak underwriting performance.
The half year 2015 financial statement of the Nigerian insurer shows net premium income (NPI) were down by 22.36 percent to N993.74 million while gross premium income (GPI) fell by 19.17 percent to N1.18 billion.
While GNI’s combine ratios (CR) of 97.13 percent in the period under review is within the 100 percent threshold, its movement from 30.17 percent in the corresponding period, shows the company may fall into a negative region. A CR above 100 percent means the company is unprofitable.
The company’s underwriting profit reduced by 90.0 percent in June 2015 to N57.75 million while it recorded a loss after tax of N322.59 million. Claims expenses were up by 72.56 percent to N757.55 million, however, underwriting expenses fell by 47 percent to N209.34 million.
GNI said it paid a total of N0.7 billion claims to its clients between January and June 2016. The Nigerian insurer is aggressive about settlement of claims to policyholders as claims ratio moved to 76.23 percent in June 2015 as against 56.80 percent as at June 2014.
“Prompt claims settlement is not just an attribute but a culture that has been adopted by all personnel in Great Nigeria Insurance Plc; we do not intend to fall short of this obligation and we will continually strive to make good our promise of exceptional service delivery at every point in time”, said Folusho Alliyu, chief technical officer.
The GNI faltering performance can be attributed to Africa’s most populous nation’s slow growing economy.
Nigeria’s economy has contracted by 2.1 percent and 0.36 percent in the first and second quarters respectively while the International Monetary Fund (IMF) forecast it will shrink by 1.80 percent, which signals the country’s worst recession in 20 years.
Inflation has risen to 17.60 percent in August 2016 as against 17.10 percent as July, the highest in 11 years. This means a lot of people will have less money in their pockets to buy a cover. They will spend the little they have on consumption.
BALA AUGIE
