Rising Yields Boost Investment Income by 40.6% at Insurers

Nigeria’s biggest insurers with strong liquidity to invest in the treasury market have seen higher investment income because of the tight money policies of central bank aimed at curbing inflation, which is pushing yields higher.

In the last two years, this exceptional item has added impetus to profitability, which ensures insurers maintain a stable solvency even amid a challenging environment.

Data gathered by MoneyCentral showed the most liquid and well capitalised insurers realised N53.70 billion income from investment in debt/equity securities and short-term investment as at September 2023, which is 40.67 percent higher than 2022’s N38.17 billion.

Tight money policies like regular Open Market Operations (OMO), Treasury Bill auctions and sustained Cash Reserve Requirement (CRR) debits, have helped push rates higher.

An OMO auction was recently held with a stop rate of 17.5% for the one-year tenor, attracting oversubscription of N350 billion.

Analysts say rising rates present a good opportunity to reinvest portions of portfolios at higher yields, which is quite positive as profitability will increase on the asset side that are mostly invested in fixed income.

Of course rising interest rates to help subdue stubborn inflation could help tame rising claims inflation that has seen combined ratio rise above the 100 percent threshold.

The central bank has hiked the monetary policy rate four consecutive times to 18.5 percent as it has postponed two meetings in the face of foreign currency crisis that was exacerbated by the unification of the exchange rate and removal of subsidies on fuel.

The Nigeria 10 years government bond reached a maximum yield of 16.145 percent (23 November 2023) and a minimum yield of 4.048 percent (3 November 2020), according to data from World Government Bonds.

The National Bureau of Statistics (NBS) said Nigeria’s headline inflation rate increased to 27.33 per cent in October 2023, the highest in eighteen years, putting pressure on Apex bank to further hike interest rates.

AIICO Insurance Plc investment income increased by 51.92 percent to N19.17 billion in September 2022 from N12.62 billion as at September 2022.

Custodian Investment Insurance’s investment income was up 37.03 percent to N4.89 billion in September 2023 from N10.86 billion the previous year.

AXA Mansard Insurance Plc investment income rose by 13.67 percent to N2.34 billion in September 2023 from N2.06 billion the previous year.

Coronation Insurance Plc investment income increased by 52.52 percent to N1.56 billion in September 2023 from N1.02 billion as at September 2o22.

Mutual Benefits Assurance Plc investment income jumped by 82.68 percent to N2.84 billion in the period under review from N1.55 billion as at September 2022.

NEM Insurance Plc investment income spiked by 71.09 percent to N1.98 billion in September 2023 from N1.16 billion as at September 2022.

Cornerstone Insurance Plc investment income increased by 35.93 percent to N2.58 billion from N1.89 billion as at September 2022.