Stock market: insurance companies continue to lose value

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The insurance sector index shows a loss in YTD of 11.8%. Wafa Assurance and Saham Assurance are the two stocks that are weighing heavily on this trend.

At the end of today's trading session, the insurance index showed a year-to-date decline of 11.80%, the third worst sector performance on the list. 

In addition to insurance companies, this index also includes Afma and Agma brokers, whose contribution to the overall capitalisation of the index is minimal. Brokers' stocks also performed better than insurers', with YTD performances of +1.01% and +5.46% respectively.

Indeed, insurers' stock prices are suffering from the difficulties facing the sector. The large insurance companies saw their profits decline in the face of the extent of the rise in claims recorded in the motor insurance sector, a sector that accounts for nearly one-third of the insurance market.

In addition to this data, which affects the profitability of the sector, insurers' latest financial results for 2018 were affected by other elements specific to each company.

Example of Wafa Assurance and Saham Insurance. The first was affected by three major peak losses, the second by a tax audit. At the end of 2018, both companies posted lower profits of 25% and 8.5% respectively.

These are the two stocks that lead the insurance index, with year-to-date declines of -12.38% for Wafa Assurance and -19.16% for Saham, thus driving the sector index down given their weight in capitalisation.

The third largest insurer in the index, Atlanta, is doing well, with a slight increase in YTD of 0.89%.

Holmarcom's subsidiary, which posted an increase in earnings at the end of 2018, was not seriously affected by the rise in automobile claims, and claims to have countered this phenomenon through various measures.

On the other hand, the three insurers still offer attractive dividends and maintain solid fundamentals. This is why the decline in their stock prices is seen by various market players as a simple effect of the overall gloom of the Casablanca financial centre. A trend that affects Saham Insurance and Wafa Insurance in a more significant way.

On the other hand, the sector as a whole is equipping itself to counter the rise in automobile claims, and to be able to grow serenely, rather than continue to generate revenue at a time when profitability is deteriorating.  

To this end, insurers say they want to continue with a strategy of selective risk development, with a rigorous underwriting policy.

It should be recalled that certain measures, with effect from 2019, have been taken to restore the technical profitability of the sector at various levels. This will include a review of the compensation system proposed by insurers, in addition to the use of sectoral tools to detect fraud, a veritable beast of the sector.