This stock is Nigeria’s worst this year
by BALA AUGIE
February 20, 2018 | 1:27 am| | | Start Conversation
It is crystal clear that Consolidated Hallmark Insurance Plc is the worst performer on the Nigerian Stock Exchange (NSE).
The insurer’s stock price fell as low as N0.29 as of Friday February 15thwhile share price has dropped 42 percent since the start of the year, the worst performer among the companies quoted on the floor of the NSE.
Consolidated Hallmark’s stocks have been nose diving since the NSE removed the N0.50 floor price, a rule that protected stocks from falling below N0.50.
This means the rule has triggered a sell off as investors now have the leeway to dump zombie stocks in search of firms that could add value to their investments.
Ironically, Consolidated Hallmark’s net income for the first nine months through September 2017 increased by 6.08 percent to N207.86 million while it has an efficient underwriting capacity as evidenced in an underwriting profit of N836.48 million.
With a solvency ratio of 159.78 percent, the company’s assets can cover commitments for future payments, liabilities. Its retained earnings of N4.49 billion is above the regulatory limits. In other words, it has the capital to take on more risk.
A return on equity of 5.03 percent is weak when compared to industry standard, as rising management expenses continue to erode profitability.
Management expenses of N1.12 billion as at September 2017 are more than underwriting profit and 39.85 percent of net premium income.
Consolidated Hallmark raised N500 million by way of rights issue late last year, but investors are skeptical whether the capital raising will underpin future earnings per share and invigorate a moribund stock price.
Insurance companies in Africa’s largest economy have been grappling with weak valuation as the N2.65 stock price of the largest insurer by market value–AXA Mansard– is lower than the N3.20 market price of Tier 2 lender, Fidelity Bank.
In short, the N113.15 billion total market capitalization of the NSE 15 insurance stock are lower than N462.45 billion market cap of tier 2 lender Stanbic IBTC Holdings.
Experts are of the view that the present 57 non life and reinsurance companies in the country are too large for optimal performance and that a scheme of mergers and acquisition will enable them take on more risk and compete on a global arena.
Consolidated Hallmark Insurance Plc (formerly Consolidated Risk Insurers Plc) was incorporated on 2 August 1991. The Company changed its name from Consolidated Risk Insurers Plc to Consolidated Hallmark Insurance Plc following its merger with Hallmark Assurance Plc and The Nigerian General Insurance Company Limited in line with the consolidation reform of NAICOM announced in 2006. Consolidated Hallmark Insurance Plc came into effect from 1 March 2007.
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