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Q4 Forecasts: Stock Brokers, Insurers In Close Harmony

Nwanne Ikemefune by Nwanne Ikemefune
February 4, 2021
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The avalanche of forecasts sent by quoted insurance companies to the Nigerian Stock Exchange, depict an insurance market that has been enamoured to fly high.

The stream of forecasts for the fourth quarter of the year was a steady flow of statistics that the concluding lap of the year was cast in iron to deliver good results and rewards for investors.

These forecasts, a distance from the dampened general economy that has been christened, staggered inflation, has lit up and refreshed the insurance market.

Insurance operators seem to be moving in a separate way that is insulated from the harsh stretches in the economy.

Without exception, all forecasts from several listed companies tell the story of something good is about to happen and all together chorus it.

Stock brokers are not surprised at the turn of events and they seem to agree with the forecasts. They are not flamboyant with words though, they occupy same platform with insurers that agree that something good is about to happen.

A high calibre stock broker, Mr. Charles Fakrogha, noted that the Nigerian economy outlook does not support the forecast of insurance performance because it has been struggling and the economy has experienced technical recession, with gross domestic product (GDP) fallen for two consecutive quarters.

Fakrogha, however, said the forecasts of the insurance companies cannot be entirely off target, admitting that some of these results that have hit the market especially from quoted companies had been at variance with what the economy is expressing.

The former chief relationship officer, TFS Securities & Investment, said the results and forecasts indicated that the insurance companies “are very resilient,” adding that, “they have put in all that they know in their operations , same applies to the banks and other sectors.”

Another stock broker, the CEO, Trust & Investment Company Limited, Mr. David Imafidon Adonri, said Covid-19 pandemic and the lockdown has not disrupted the income of insurers because business continued on the virtual channel.

On the investment side, he said a lot of them invested in financial assets and the financial market like the insurance subsector, has been functioning inspite of the lockdown, because they simply shifted their operations to the virtual space.

“That is why most of the insurance companies continue to declare profits. We also see the banks making profits and declaring interim dividends,” he stated.

Fakrogha also said the bullish run has served as good lane for smooth glide for insurers to brace the profit tape when the fourth quarter curtain drops.

Besides, he said the expectations of the insurance operators is raised by the regulators: National Insurance Commission, SEC and NSE, that placed firm requirements that would keep the operators in business.

“Most insurance companies are doing everything they can to make sure that they meet those requirements and still continue to remain in business,” he stated.

He also attest that the services of insurance companies has been raised, stating how in the comfort of his room, he received a mail asking for certain information to process his insurance benefit and it was paid to him there after without his physical presence in the company.

Still on the forecasts, Adonri said, the hunched economy could still cast a shadow on insurance performance in the fourth quarter. He said there could be a slow down as a result of staggering economy, “as business activities decline, income to insurance companies would also decline” as new covers would not be sought for non existing businesses.

Besides, he said interest rates in the financial market is also declining and most insurers hold treasury instruments, income may not also grow the way it has been previously. That notwithstanding, it is expected that insurance will still be profitable.

He also pointed that the forecasts cannot be sweeping performance for all quoted insurance companies, “the gains expected is for some of them that have been profitable. After the 2008 global meltdown, a lot of them were incapacitated and have still not recovered. They have not been doing well and the market has not been rewarding them and their prices are still very low.

The story is different for those that have successfully emerged from that crisis, “they have rebuilt their balance sheet, have been profitable and have remained profitable. Those are the ones the market are rewarding and, we can count them on our fingers. The capital market will only reward those that are performing well and rewarding investors.”

Mr. Fakrogha also said the expected good performance from the companies forecasts were not enough to push up stock price from their current low price tags of insurance stocks. He said it depends on investors expectation; if companies after good performance fail to declare dividends, stock prices would not go up. However, if the performance of the company improves, it will reflect on the share price.

He also said insurers improvement in digital transaction has warmed them into the arena of generation Z who are internet savvy and do not have the patience to sit in insurance offices but would rather transact online.

He noted that insurance companies now meet them in the web and more of these young people are embracing insurance. By so doing, it will increase insurance policy sales and at the same time increase their bottom line.

The notable presence of insurers in the digital space, he said is making analysts to believe that there is going to be a better prospect for insurance companies before the end of the year.

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