NEM Insurance Market Valuation Jumps 31%
Shares of NEM Insurance Plc made a strong uptrend in the just concluded week, rising by more than 31%, closing at N5 on Friday from N3.82. Though there is no indication of director dealing, the company share pops throughout the trading sessions last week.
Relatively, the equities market temperature was hot as treasure hunters return to the equities space to take positions in value stocks.
Good pricing and relatively healthy fundamentals remain an attractive point in the local bourse which trades at discount compared to peers in the African region.
The strong gains in the insurance company shares helped reverse the previous week’s losses seen on the Nigerian Exchange in the past week. The market was up N169 billion, thus pushed year to date returns above 16%.
In the first half of 2022, NEM Insurance reported a 25.87% growth in gross premium written to N20.25 billion, driven by improvements on motor insurance, fire insurance and general accident insurance.
In the period, the company’s motor insurance premium written jumped 40.45%, while premium from the fire insurance business grew by 33.88% and there was a 21.77% jump in premium from its accident insurance business unit.
However, the healthy revenue growth was followed by higher claims. In the first half, claims expenses rose by 11.09% to N4.31 billion.
Given rising activities, Meristem Securities analysts noted in its equity report that claims payment from the motor segment constitutes a bulk of total claims expenses. READ: GCR Upgrades NEM Insurance on Sustained Earnings Strength
However, analysts said despite the rise in net claims, there was a reduction in both loss and underwriting ratios to 21.29% and 27.29% from 24.12% and 28.73% in the first half of 2021 respectively as the top-line grew faster than loss and underwriting expenses.
Thus, the firm’s operational efficiency improved as the combined ratio reduced to 48.58% from 52.85% in the first half of 2021. Consequently, underwriting performance advanced 15.37% year on year to N3.69 billion.
The strong underwriting performance and the growth in investment income cumulatively buoyed the bottom line which jumped up 25.73% to N2.53 billion, despite a 12.74% increase in operating expenses.
“We maintain our outlook for the business, premised on an uptick in the gross premium written, and improvement in yield which will translate to higher investment income”, Meristem Securities stated.
Analysts said NEM Insurance solvency has improved to 1.28x year to date as against 1.15x in 2021. On the downside, the insurance company’s earnings assets dropped to 59.80%, from 61.44% in 2021 while underwriting margin stood at 20.13% compared to 21.00% in the comparable period in 2021.
After the strong gain the insurance company now worth N25 billion on the Nigerian Exchange #NEM Insurance Market Valuation Jumps 31%
