Stock & Analyst Updates | |
Stock & Analyst Updates | |
8651 VIEWS | |
![]() |
Friday, May 31, 2019 / 07:30PM / By TheAnalyst /Proshare Research
A
growing number of investors and analyst are taking a keener look at Insurance
companies as the apex regulatory body of the industry, National Insurance
Commission (NAIC), announced a new capital base for different categories of
insurance firms operating in Nigeria. The capital base for life insurance firms
was moved from N2b to N8b; general insurance firms had their base increased
from N3bn to N10bn, while composite insurers saw their capital base pushed from
N10bn to N15bn.
The new equity base of insurers while likely to strengthen their underlying operational capacity may also lead to a flurry of mergers and acquisition in coming months. Besides, in a slowly growing economy, one of the several industries most harshly affected by lower patronage has been insurance. Against this background a review of the performance of NEM Insurance has thrown up aspects of the business that remains resoundingly good, others that appear a bit hazy, and those that show promise if appropriate corporate actions come into play.
Introduction
Data from the Nigerian
Stock Exchange (NSE) show that there are 23 listed companies in the sub-sector-
Insurance carriers, Brokers and services in the financial service sector of the
listed companies in Nigeria. Of the listed companies;
With a market
capitalization of N12.46bn (as at 20th May, 2019), NEM Insurance PLC (NEM) contributes
0.11% to the entire market capitalization of the equities market. In sector, it
is the 2nd most capitalized company after MANSARD (which has a
market capitalization of N18.90bn as at 20th May, 2019).
Financials
From a growth rate of
9.35% in Q1 2018, NEM’s earnings has more than doubled in Q1 2019 as the
company reported a growth of 19.87% in its Gross Premium Written from N5.67bn
in Q1 2018 to N6.80bn in Q1 2019. Overall the quarters analyzed NEM has been
able to maintain a steady growth of Gross Premium Written. However, it is noteworthy
that the reverse appears to be the case when it comes to profit after tax (PAT).
Table 1- Change in NEM Gross
Premium and PAT from Q1 2018 to Q1 2019
Quarter |
Gross
Premium N'm |
% chg in
Gross Premium |
PAT N'm |
% chg in
PAT |
Q1 2018 |
5673 |
9.35% |
751.97 |
24.38% |
Q2 2018 |
9156 |
12.80% |
1508 |
20.77% |
Q3 2018 |
12561 |
13.55% |
1601 |
-5.38% |
Q4 2018 |
15049 |
12.17% |
2047 |
-26.23% |
Q1 2019 |
6800 |
19.87% |
849.57 |
12.98% |
Source: NEM Annual Reports and Accounts |
The table above shows that the growth rate of PAT has decreased by 50% from 24.38% growth recorded in Q1 2018 to 12.98% growth recorded in Q1 2019. Furthermore, despite growth in Gross Premium Written, PAT in Q3 and Q4 declined by 5.38% and 26.23% respectively when compared with the PAT in the contemporary period of Q3 and Q4 of 2017. The decrease in PAT was as a result of an increase in claims expenses and unearned premium over the periods.
Chart 1- NEM Gross Premium Written from Q1 2018 to Q1 2019
Source: Proshare Research
Chart 2- NEM PAT from Q1 2018 to Q1 2019
Source:
Proshare Research
For insurance companies,
the ability to settle claims promptly and conveniently is a vital component of
the business. So far NEM appears to have coped fairly well in this regards, as
growth in its claims liabilities has been supported by an increase in reserves
and an improvement in invested securities, providing the liquidity support to
bridge the claims gap with appropriate liquid assets.
Over the five quarters under
review between 2018 and 2019, NEM has been
able to record positive growth rates in invested assets and claims. In 2018,
the insurer was able to grow invested assets to N22.49bn, which represented an
82.84% increase compared to Q4 2017. During this period, claims on the company increased
by 9.33% from N6.52bn in Q4 2017 to N7.13bn in Q4 2018.
Table 2- Change in NEM Invested
Assets and Claims from Q1 2018 to Q1 2019
Quarter |
Invested
Assets N'm |
% chg in
Invested Assets |
Claims N'm |
% chg in
Claims |
Q1 2018 |
15772.95 |
28.23% |
7094 |
8.82% |
Q2 2018 |
12985.56 |
5.57% |
7002 |
7.41% |
Q3 2018 |
13363.56 |
8.64% |
7068 |
8.42% |
Q4 2018 |
22490.95 |
82.84% |
7127 |
9.33% |
Q1 2019 |
17500.95 |
10.96% |
7717 |
8.28% |
Source: NEM Annual Reports and Accounts |
NB: The Invested assets
considered are the assets that are invested in the money market and easily converted
to cash. These constitute financial assets, investment properties, reinsurance
assets and cash and cash equivalents. The claims constitute the insurance
contract liability of the company.
Chart 3- NEM Invested Assets
from Q1 2018 to Q1 2019
Source: Proshare Research
Chart 4- Claims on NEM from Q1 2018 to Q1 2019
Source:
Proshare Research
Share Price Movement
NEM started 2018
with a share price of N1.56 and closed Q1 2018 with a share price of 2.70 representing
the highest share price of the company in the first quarter. As at the end of
the trading day in 2018, the share price of the company was at N2.62, which
represents a 67.95% Y-o-Y growth rate in the company’s shares. In 2019, NEM opened the
year with a share price of N2.70 and closed Q1 2019 at a share price of N2.22
which represents a 17.78% decline during Q1 2019. Over the last seven trading
days, the company’s share price increased marginally by 7.27% from N2.20 to
N2.36 as at 22nd May 2019.
Visit NEM Insurance Plc IR Page in
Proshare MARKETS
Graph
– Year to Date Share Price Movement
Peer Review – Financials, Key Ratios and Share Price Performance
NEM Financials Compared with Peers
Table 3- Peer Analysis on Invested Assets
Companies |
Y-o-Y PEER ANALYSIS
(Invested Assets) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Invested Assets |
|
AIICO |
115825 |
99806 |
16.05% |
GUINEAINS |
3159 |
2768 |
14.13% |
CORNERST |
18758 |
16569 |
13.21% |
LAWUNION |
10574 |
9442 |
11.99% |
NEM |
17501 |
15773 |
10.96% |
REGALINS |
7926 |
7228 |
9.66% |
CHIPLC |
9188 |
8757 |
4.92% |
MANSARD |
66762 |
63967 |
4.37% |
MBENEFIT |
40091 |
38561 |
3.97% |
STDINSURE |
6272 |
6044 |
3.77% |
LINKASSURE |
22267 |
21687 |
2.67% |
SUNUASSUR |
9296 |
9144 |
1.66% |
NIGERINS |
9450 |
9535 |
-0.89% |
STACO |
6131 |
6281 |
-2.39% |
UNIVINSURE |
5315 |
5533 |
-3.94% |
AFRINSURE |
37359 |
39609 |
-5.68% |
WAPIC |
13780 |
14677 |
-6.11% |
PRESTIGE |
10039 |
10885 |
-7.77% |
SOVRENINS |
7428 |
8243 |
-9.89% |
LASACO |
13971 |
16354 |
-14.57% |
GOLDINSURE |
255 |
329 |
-22.49% |
Source:
Companies Reports, Proshare Research |
Of
the 21 insurance companies analyzed, the table shows that 12 recorded a Y-o-Y
increase in invested assets. When compared with peers, NEM fairs well as it ranks 5th in terms of growth in invested
assets as it recorded a 10.96% increase in invested assets Y-o-Y. Invested
assets increased from N15.77bn in Q1 2018 to N17.50bn in Q1 2019.
Chart 5- Peer Analysis on Y-o-Y % Change in Invested Assets
Source:
Proshare Research
AIICO tops in the category
both in terms of the amount invested and in the growth of invested assets as
the company’s invested assets grew from N99.81bn in Q1 2018 to N115.83bn in Q1
2019. However, GOLDINSURE recorded the least
growth in invested assets with a Y-o-Y decline of 22.49%.
Chart 6- Q1 2019 & Q1 2018 Invested Assets of NEM and Peers
Source: Proshare Research
Table 4- Peer Analysis on Reserves
Companies |
Y-o-Y PEER ANALYSIS
(Reserve) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Reserve |
|
AFRINSURE |
-30983 |
-26368 |
17.50% |
CORNERST |
2311 |
1999 |
15.61% |
AIICO |
8255 |
7286 |
13.30% |
LINKASSURE |
4514 |
4075 |
10.77% |
WAPIC |
5207 |
4716 |
10.41% |
NEM |
9174 |
8324 |
10.21% |
CHIPLC |
2122 |
1928 |
10.06% |
LASACO |
2787 |
2539 |
9.77% |
MANSARD |
10284 |
9397 |
9.44% |
MBENEFIT |
3030 |
2802 |
8.14% |
SUNUASSUR |
-4305 |
-4082 |
5.46% |
SOVRENINS |
2774 |
2648 |
4.76% |
STDINSURE |
1673 |
1611 |
3.85% |
PRESTIGE |
2071 |
2012 |
2.93% |
STACO |
-3097 |
-3018 |
2.62% |
REGALINS |
1983 |
1936 |
2.43% |
LAWUNION |
2277 |
2236 |
1.83% |
NIGERINS |
1257 |
1241 |
1.29% |
GOLDINSURE |
-9604 |
-9826 |
-2.26% |
GUINEAINS |
-396 |
-467 |
-15.20% |
UNIVINSURE |
-1661 |
-2647 |
-37.25% |
Source:
Companies Reports, Proshare Research |
In
terms of reserve, most insurance companies experienced an increased growth Y-o-Y
as only 3 of the companies analyzed experienced a decline. The growth of NEM’s reserve Y-o-Y above its peers indicates
underlying operating strength; NEM’s reserve growth is 6th with a 10.21%
increase from N8.32bn in Q1 2018 to N9.17bn in Q1 2019. It is important to note
that GOLDINSURE recorded a decline in
reserves just as the growth of its invested assets equally fell Y-o-Y. UNIVINSURE tops the list of
companies which saw a fall in reserves, followed by GUINEAINS.
Chart 7- Q1 2019 & Q1 2018
Reserve of NEM and Peers
Source:
Proshare Research
As
can be seen from the chart above, AFRINSURE has a negative reserve
and this has increased Y-o-Y by 17.50%. It is the worst performing insurer in
terms of reserves as its negative reserve is the highest of the companies (SUNUASSUR, STACO, GOLDINSURE, GUINEAINS and UNIVINSURE) which declared
negative reserves over the period.
Chart 8- Peer Analysis on Y-o-Y % Change in Reserve
Source: Proshare Research
Table 5- Peer Analysis on Claims
Companies |
Y-o-Y PEER ANALYSIS
(Claims) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Claims |
|
LINKASSURE |
4458 |
2828 |
57.64% |
LAWUNION |
4434 |
3523 |
25.86% |
LASACO |
6438 |
5188 |
24.09% |
MANSARD |
27228 |
22539 |
20.80% |
UNIVINSURE |
858 |
713 |
20.34% |
MBENEFIT |
12321 |
10299 |
19.63% |
CORNERST |
12659 |
10653 |
18.83% |
AIICO |
75858 |
65541 |
15.74% |
NEM |
7717 |
7094 |
8.78% |
STDINSURE |
4972 |
4637 |
7.22% |
REGALINS |
3245 |
3103 |
4.58% |
CHIPLC |
3973 |
3804 |
4.44% |
GOLDINSURE |
4557 |
4430 |
2.87% |
WAPIC |
9891 |
9621 |
2.81% |
AFRINSURE |
37228 |
36278 |
2.62% |
SUNUASSUR |
3985 |
3929 |
1.43% |
SOVRENINS |
3102 |
3089 |
0.42% |
NIGERINS |
10063 |
10023 |
0.40% |
GUINEAINS |
471 |
556 |
-15.29% |
STACO |
2888 |
3563 |
-18.94% |
PRESTIGE |
2751 |
3605 |
-23.69% |
Source:
Companies Reports, Proshare Research |
The
table on the claims of insurance companies follows the same pattern as that of
reserves. The table shows that the majority of insurance companies experienced
an increase in claims against them. The data showed that the claims on NEM increased over the period by 8.78% while LINKASSURE topped the list with
57.64% growth in claims and PRESTIGE topped the list of
companies with a decline in claims over the period as claims fell by 23.69%.
Chart 9- Q1 2019 & Q1 2018 Claims on NEM and Peers
Source:
Proshare Research
Of
all the companies compared, AIICO has the highest claims
on it as the total claims on it during Q1 2019 was N75.86bn, which represents a
15.74% increase from N65.54bn recorded in Q1 2018. GUINEAINS recorded the lowest
amount of claims on it.
Chart 10- Peer Analysis on Y-o-Y
% Change in Claims
Source:
Proshare Research
Table 6- Peer Analysis on Gross Premium
Companies |
Y-o-Y PEER ANALYSIS (Gross
Premium) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Gross Premium |
|
UNIVINSURE |
809 |
535 |
51.21% |
PRESTIGE |
1989 |
1354 |
46.90% |
LASACO |
7797 |
5778 |
34.94% |
AIICO |
14324 |
10752 |
33.22% |
CORNERST |
9604 |
7367 |
30.37% |
LAWUNION |
2241 |
1801 |
24.43% |
GUINEAINS |
939 |
759 |
23.72% |
MANSARD |
17423 |
14168 |
22.97% |
CHIPLC |
2572 |
2131 |
20.69% |
NEM |
6800 |
5673 |
19.87% |
STACO |
4782 |
4368 |
9.48% |
WAPIC |
4813 |
4466 |
7.77% |
MBENEFIT |
11891 |
11053 |
7.58% |
REGALINS |
2030 |
1890 |
7.41% |
GOLDINSURE |
845 |
813 |
3.94% |
LINKASSURE |
2216 |
2172 |
2.03% |
STDINSURE |
3420 |
3917 |
-12.69% |
SOVRENINS |
4210 |
5207 |
-19.15% |
AFRINSURE |
4037 |
5105 |
-20.92% |
SUNUASSUR |
851 |
1203 |
-29.26% |
NIGERINS |
3042 |
7136 |
-57.37% |
Source:
Companies Reports, Proshare Research |
Compared
to peers, NEM has been a key player in terms of growth in premium written in the
sector. The table above shows that NEM recorded a Y-o-Y increase of 19.87% from N5.67bn recorded in Q1 2018 to
N6.80bn recorded in Q1 2019. UNIVINSURE tops this list with a
growth in premium written of 51.21% Y-o-Y while NIGERINS declared the highest
decline in gross premium written over the period under review.
Chart 11- Peer Analysis on Y-o-Y % Change in Gross Premium
Source: Proshare Research
Table 6- Peer Analysis on PAT
Companies |
Y-o-Y PEER ANALYSIS (PAT) |
||
Q1 2019 |
Q1 2018 |
% Chg in PAT |
|
AFRINSURE |
-4708 |
-2187 |
115.27% |
WAPIC |
490 |
233 |
110.30% |
LASACO |
542 |
401 |
35.16% |
AIICO |
1027 |
806 |
27.42% |
PRESTIGE |
355 |
280 |
26.79% |
LINKASSURE |
439 |
375 |
17.07% |
NEM |
850 |
752 |
13.03% |
MANSARD |
890 |
822 |
8.27% |
CHIPLC |
199 |
210 |
-5.24% |
REGALINS |
214 |
240 |
-10.83% |
MBENEFIT |
666 |
790 |
-15.70% |
SUNUASSUR |
-222 |
-296 |
-25.00% |
STDINSURE |
314 |
435 |
-27.82% |
GOLDINSURE |
-149 |
-243 |
-38.68% |
LAWUNION |
65 |
113 |
-42.48% |
SOVRENINS |
309 |
560 |
-44.82% |
NIGERINS |
16 |
364 |
-95.60% |
STACO |
-11 |
-1198 |
-99.08% |
UNIVINSURE |
0.844 |
-307 |
-100.27% |
CORNERST |
659 |
-2114 |
-131.17% |
GUINEAINS |
-134 |
70 |
-291.43% |
Source:
Companies Reports, Proshare Research |
As
at the end of Q1 2019, only 8 of the companies declared growth in their PAT of
which NEM is among. NEM was able to grow its PAT by 13.03%. The PAT grew from N752mln recorded
in Q1 2018 to N850mln in Q1 2019. This emanated from an increase in the
company’s gross premium and investment income as the investment income
increased from N136.05mln in Q1 2018 to N236.63mln in Q1 2019.
Chart 12- Peer Analysis on Y-o-Y % Change in PAT
Source: Proshare Research
Among
the peers, AFRINSURE recorded the highest
growth in PAT, followed by WAPIC and LASACO to complete the top 3. GUINEAINS, CORNERST and UNIVINSURE tops the list of
companies with the highest decline in PAT.
NEM Financials Compared with Peers
Table 7- Peer Analysis on Liquidity Ratio
Companies |
Y-o-Y PEER ANALYSIS
(Liquidity Ratio) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Liquidity Ratio |
|
GUINEAINS |
6.7070 |
4.9784 |
34.72% |
PRESTIGE |
3.6492 |
3.0194 |
20.86% |
STACO |
2.1229 |
1.7628 |
20.43% |
REGALINS |
2.4425 |
2.3294 |
4.86% |
NEM |
2.2679 |
2.2234 |
2.00% |
CHIPLC |
2.3126 |
2.3021 |
0.46% |
AIICO |
1.5269 |
1.5228 |
0.27% |
SUNUASSUR |
2.3327 |
2.3273 |
0.23% |
NIGERINS |
0.9391 |
0.9513 |
-1.29% |
STDINSURE |
1.2615 |
1.3034 |
-3.22% |
CORNERST |
1.4818 |
1.5553 |
-4.73% |
AFRINSURE |
1.0035 |
1.0918 |
-8.09% |
WAPIC |
1.3932 |
1.5255 |
-8.67% |
SOVRENINS |
2.3946 |
2.6685 |
-10.26% |
LAWUNION |
2.3848 |
2.6801 |
-11.02% |
MBENEFIT |
3.2539 |
3.7441 |
-13.09% |
MANSARD |
2.4520 |
2.8381 |
-13.60% |
UNIVINSURE |
6.1946 |
7.7602 |
-20.17% |
GOLDINSURE |
0.0560 |
0.0743 |
-24.65% |
LASACO |
2.1701 |
3.1523 |
-31.16% |
LINKASSURE |
4.9948 |
7.6687 |
-34.87% |
Source:
Companies Reports, Proshare Research |
The liquidity ratio of the insurance companies is a measure of the ratio
of their invested assets over the claims on them. The higher the liquidity
ratio, the more liquid they are. GUINEAINS recorded
the highest liquidity ratio in Q1 2019 and it also topped other insurance
companies in terms of growth in the ratio Y-o-Y. NEM is also in the green in this metric as it recorded a
marginal increase of 2.0% in its liquidity ratio from 2.22 in Q1 2018 to 2.27
in Q1 2019. However, LINKASSURE recorded
the highest decline in liquidity ratio as the ratio decreased from 7.67 in Q1
2018 to 4.99 in Q1 2019.
Chart 13- Peer Analysis on Y-o-Y % Change in Liquidity Ratio
Source: Proshare Research
Table 8- Peer Analysis on Loss Ratio
Companies |
Y-o-Y PEER ANALYSIS (Loss Ratio) |
||
Q1 2019 N’m |
Q1 2018 N’m |
% Chg in Loss Ratio |
|
NIGERINS |
3.30802 |
1.40457 |
135.52% |
LINKASSURE |
2.01173 |
1.30203 |
54.51% |
SUNUASSUR |
4.68273 |
3.266 |
43.38% |
AFRINSURE |
9.2217 |
7.10637 |
29.77% |
SOVRENINS |
0.73682 |
0.59324 |
24.20% |
STDINSURE |
1.4538 |
1.18381 |
22.81% |
MBENEFIT |
1.03616 |
0.93178 |
11.20% |
LAWUNION |
1.97858 |
1.95614 |
1.15% |
GOLDINSURE |
5.3929 |
5.44895 |
-1.03% |
MANSARD |
1.56276 |
1.59084 |
-1.76% |
REGALINS |
1.59852 |
1.6418 |
-2.64% |
WAPIC |
2.05506 |
2.15428 |
-4.61% |
LASACO |
0.8257 |
0.89789 |
-8.04% |
CORNERST |
1.3181 |
1.44604 |
-8.85% |
NEM |
1.13485 |
1.25048 |
-9.25% |
AIICO |
5.29587 |
6.0957 |
-13.12% |
CHIPLC |
1.54471 |
1.78508 |
-13.47% |
UNIVINSURE |
1.06057 |
1.33271 |
-20.42% |
STACO |
0.60393 |
0.81571 |
-25.96% |
GUINEAINS |
0.5016 |
0.73254 |
-31.53% |
PRESTIGE |
1.38311 |
2.66248 |
-48.05% |
Source:
Companies Reports, Proshare Research |
The loss ratio measures the ratio of claims over the gross premium of
the insurance companies. The claims represent the losses while gross premium
represents the gains. Therefore, in general term, a loss ratio is the ratio of
losses to gains. Therefore, a high loss ratio may indicate that the insurance
company will not be able to meet its financial obligations and the lower the
loss ratio, the better.
Chart 14- Peer Analysis on Y-o-Y % Change in Loss Ratio
Source: Proshare Research
In Q1 2019, NEM was able to reduce its loss ratio by 9.25% thereby
making it come 7th in the companies that have the highest decline in loss
ratio. The company’s loss ratio decreased from 1.25 in Q1 2018 to 1.13 in Q1
2019. NIGERINS topped the
list as the company with the highest loss ratio as it recorded a spike of
135.52% growth in loss ratio Y-o-Y. PRESTIGE came top
among the companies with a decline in loss ratio as the company was able to
reduce its loss ratio by 48.05% over the period.
Table 9: Peer Analysis on Share Price Performance
Except
for NEM, MANSARD and AIICO, all the other insurance
companies listed on the NSE are traded below 50 kobo as at 22nd May, 2019. NEM has the highest share price of N2.36. However, this price represents a
decline of 1.26% from N2.39, with which it started the year. Based on YTD
performance, only 3 of the insurance companies have experienced YTD growth as
at 22nd May, 2019. SOVRENINS records the highest
gain as its share price increased by 15%. LASACO and AIICO followed with YTD share
price increase of 6.90% and 3.13% respectively. While STACO last traded on 18th
September, 2018, there was no trading in the shares of GOLDINSURE in 2018 due to its
suspension by the NSE for late filing of its financial statements.
Chart 15- Peer Analysis on YTD Share Price Performance
Source: Proshare Research
Among those that have a
negative share price growth YTD, NEM is the
lowest as it recorded 1.26% decline as at 22nd
May, 2019. In Q1 2019, it also recorded decline in share price movement as it
ended the Q1 at N2.22 which represents 7.11% decline from N2.39 which it used
in starting the year. However, in Q1 2018, NEM topped the gainers list among its peers as its share price grew by
51.93% from N1.81 at the beginning of the year to N2.75 as at 31st March, 2018.
Conclusion
In 2018, NEM was among
the top 3 best-performing stocks and the best performing stock in its sector on
the bourse. NEM has the
highest share price in its sector as of 22nd May, 2019.
Comparing the company’s
financials with its peers, NEM has fared better
in all metrics as it has recorded moderate growth between Q1 2018 and Q1 2019.
However, its share price YTD has declined by 1.26%, a situation that bucks the
company’s financial performance.
Related News
1. NEM Declares N849.56m PAT in Q1 2019
Result,(SP:N2.32k)
2.
NEM Declares N2.05bn PAT in 2018
Audited Results,(SP:N2.01k)
3. NEM Announces the Commencement of the
Company’s Closed Period from February 18, 2019
4. NEM Insurance Announces Investment By
AFIG Funds
5. VFD Group Sells Stake in NEM
Insurance
6. CCNN, CILEASING and NEM Top As Best
Performing Stocks YTD
7. NEM Declares N1.60bn PAT in Q3 2018
Results (SP:N2.62k)
8.
NEM Insurance Plc 48th AGM And
Associated Governance Issues
9. SEC Invalidates NEM Insurance Plc’s
48th AGM and Resolutions; Orders Firm to Reconvene Proper AGM
10. ALERT: Again, NEM Trades 52.18% of
Total Market Volume Today
11. ALERT: NEM Trades 34.86% of Total
Market Volume Today
12. NEM Declares N1.51bn PAT in Q2 2018
Results,(SP:N3.0k)
13. NEM Declares N751.97m PAT in Q1 2018
Result,(SP:N2.80k)