AIICO, Lasaco, Mansard, Top Insurance Stocks For 2024 – Meristem

AIICO Insurance Plc, Lasaco Assurance Plc, and AXA Mansard Insurance Plc are Meristem Securities Limited’s top insurance stocks for 2024 as these firms have solid fundamentals and attractive valuations.

These buy ratings mean these three insurers are in a better position to benefit from the opportunities that abound this year, given that higher interest rates and acceptability of insurance by once indifferent consumers are expected to buoy sector performance.

Analysts at Meristem Securities placed a buy rating on the stock of AIICO Insurance, with a target price of N1.53 for 2024, and an upside potential of 33 per cent as the insurer recorded a return on equity (ROE) of 20 percent and a price-to-earnings ratio of 6.64 times.

The investment house placed a buy rating on the stock of Lasaco Insurance, and a target price of N4.50 combined with an upside potential of 45 percent will allure investors who wish to magnify their earnings.

AXA Mansard stocks were placed on buy ratings by Meristem Securities with a target price of N6.30 and an upside potential of 12.30 percent.

The big Insurers in Africa’s largest economy recorded a profit in the third quarter, thanks to investment income and foreign exchange gains, but spiralling claims and operating expenses on the back of rising inflation led to deteriorating underwriting performance or increased combined ratio.

To validate the big insurers’ strong earnings, they have a solid solvency ratio that corroborates financial strengths and ability to meet claims as at when due.

For the first nine months through September 2023, AIICO Insurance’s solvency margin ratio stood at 182 percent, higher than 154 percent recorded in 2022, according to data from the company’s website.

Despite the harsh environment, insurance products witnessed healthy demand, stemming from increased consumer confidence in the sector during the year.

Little wonder the industry grew by 15.21 percent year on year (YoY) in the third quarter (Q3) 2023. But that represents a slower growth compared to the 19.09 percent YoY recorded in Q3:2022 and other financial institutions, which grew by 29.66 percent YoY in Q3:2023 (vs.12.03 percent in Q3:2022), according to data from the National Bureau of Statistics (NBS).

Analysts at Meristem Securities maintain a positive outlook for the sector in 2024, hinged on expansion across business segments, especially the life insurance segment, which should support premium growth as insurance uptake increases.

“In the same vein, we anticipate increased health insurance coverage as policy reforms by the new administration support developments in the health sector,” said the analysts.

“Also, our expectation of a high fixed-income yield environment in the year should lower provisioning for life & annuity funds and bolster investment income. Thus, we expect underwriting profit and net income to increase during the period. On the other hand, increased underwriting and operating costs resulting from the high inflationary environment may drag profitability for the insurers during the year,” summed the analysts.