News Africa10 Aug 2020

Nigeria:Low investment yield in insurance sector deters investors

10 Aug 2020

Investors are wary of investing in the insurance sector due to the consistent low returns on investment by some operators.

This is despite the ongoing recapitalisation exercise in the insurance sector is opening up opportunities for investors to buy into insurance companies, reported Vanguard.

Ms Ada Ufomadu, senior financial institutions analyst at Agusto & Co, told Vanguard that the inability of some insurers to create value in their investments is a reflection of their lack of investment skills.

"They are not investing in the right assets. Some of them have long term assets, for instance, in real estate. They have investments in bare lands and the lands are just there sitting in their books and they are not doing anything with these investments. They keep revaluing them and getting revaluation amounts that cannot be actualised.”

She added, "Another problem is their investment inequities. They invested in stocks of companies when there was a boom in the capital market. After the bust happened, most of them didn't check out of the exposure, they just stayed there assuming that things will go back up.” She indicated that much of such investments have not been written down for diminution in value.

“Going forward, they need to be strategic in their allocation of assets," she said.

Ms Ufomadu stated that investors are also wary of the sector because several insurance companies do not wish to open up their books.


 

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