Financial Derivatives on the outlook for Nigerian insurers

Nigeria's insurance sector has been buzzing with positive performances as companies work towards meeting the extended 2021 insurance recapitalization deadline. Ebunoluwa Babarinde, Manager, Treasury and Financial Institutions at Financial Derivatives, shed light on some recent earnings from the industry. According to Babarinde, both Custodian and American International Insurance reported significant growth in their revenues from January to the end of the last trading day of the week. Custodian saw an 80% growth in revenue, mainly driven by income from their insurance subsidiaries, with a notable 18.6% increase in growth revenue income. The company's total assets also rose by 17% to $18.8 billion, reflecting a strong growth in cash and financial assets. On the other hand, American International Corporation recorded a 23% increase in premium income, closing at $16 billion, and a 10.8% rise in total assets to $176 billion. The company attributed this growth to increased cash and financial assets. Both companies saw a decline in net fair value gains and losses, impacting their profits. Custodian reported a $4.3 million loss compared to a $1 million profit in the previous year, while American International recorded a drop in income due to reduced net fair value gains. Despite these challenges, American International saw a 24% rise in profit before tax to $1.4 billion. Babarinde highlighted that investors are increasingly showing interest in the Nigerian insurance sector, driven by regulatory requirements for higher capital thresholds. With the industry's low penetration rate of 1.9% among the population, there is a growing emphasis on adopting digital solutions to make insurance products more accessible and affordable. Additionally, initiatives like micro-insurance are expanding the market by offering insurance products with lower capital requirements. The investment community is optimistic about the sector's potential, with companies like Custodian trading at a 52-week high and others also showing positive performance. The upcoming mergers, acquisitions, and rights issues in the industry are further fueling investor confidence in the sector's growth prospects. Overall, the Nigerian insurance industry is poised for significant value delivery in the coming months.