Sunu Assurances Plc has emerged as one of the most remarkable success stories of 2024 on the Nigerian Exchange (NGX), achieving a staggering 581% year-to-date (YtD) growth by December 20. As the second-best performer across the exchange and the leading light in the insurance sector, Sunu has captured attention in a market traditionally dominated by banking and industrial stocks.
This comes after an impressive 279% YtD gain in 2023, signaling a consistent upward trajectory. But what’s driving this performance, and can Sunu sustain this momentum in 2025?
A Sector-Wide Resurgence
Sunu’s rise is part of a broader renaissance in Nigeria’s insurance industry. Among the 22 listed insurance companies, the sector has achieved an average YtD growth of 89% in 2024, significantly outpacing the NGX All Share Index’s 35.25% gain. The NGX Insurance Index posted a remarkable 92.49% return, highlighting the sector’s resilience and growth potential.
In contrast, the banking sector experienced a sharp slowdown, with an average YtD return of just 23.30%, a steep drop from 128% in 2023. Against this backdrop, Sunu Assurances stands out as a beacon of stability and growth, offering inflation-beating returns to investors.
Transformation Under SUNU Group
Originally founded as Equity Assurance in 1984, Sunu underwent a significant transformation following its acquisition by the pan-African SUNU Group, which operates in 17 African countries. This strategic move ushered in a period of financial recovery and growth.
After recording a pre-tax loss of ₦266 million in 2019, Sunu has consistently delivered profits. In 2023, its profit before tax (PBT) skyrocketed by 290% to ₦2.817 billion. By the third quarter of 2024, the company had already exceeded this figure, reporting a PBT of ₦5.216 billion—an 85% increase over its full-year 2023 performance.
Insurance revenue has grown at a compound annual growth rate (CAGR) of 44% over the past five years, with 2024’s first three quarters already surpassing 2023’s total revenue by 15%.
Efficiency as a Growth Driver
Sunu’s operational efficiency has been pivotal to its success. The company has improved its claims payout ratio—an indicator of risk management—from 36.69% in the first nine months of 2023 to 21.49% during the same period in 2024. Additionally, its unearned premium-to-gross premium written ratio improved from 16.10% to 13.31%, reflecting better revenue recognition practices.
The Role of Foreign Exchange Gains
While Sunu’s operational performance has been stellar, a significant portion of its profits—62% of its PBT in the first nine months of 2024—came from foreign exchange gains. These non-operating gains, while beneficial in the short term, raise questions about the sustainability of the company’s earnings.
Furthermore, Sunu’s investment income remains modest at ₦976 million, underscoring its heavy reliance on core insurance operations. This concentration heightens the company’s exposure to potential sectoral risks.
Stock Performance and Valuation
Sunu’s stock price hit ₦7.49 on December 20, 2024, marking five-year and 52-week highs. With a market capitalization of ₦43.5 billion, the stock is trading at a price-to-earnings (P/E) multiple of 7.98x, significantly above the insurance sector’s average of 2.72x.
While the company’s return on equity (ROE) of 32% comfortably exceeds its cost of equity (17%), this valuation premium reflects high investor expectations. The stock’s price-to-earnings growth (PEG) ratio of 0.04 suggests it is more expensive relative to its growth potential compared to peers, whose average PEG ratio is 0.01.
What Lies Ahead?
BusinessNG Analysts forecast a PBT of ₦4.43 billion for Q4 2024, but given Sunu’s track record, it may surpass this estimate. Investors are closely monitoring the company’s ability to sustain growth while addressing risks tied to foreign exchange reliance and revenue concentration.
Despite these challenges, Sunu’s fundamentals remain strong, positioning it for continued success if it can diversify its revenue streams and maintain operational efficiency.
In nutshell, Sunu Assurances has delivered exceptional returns in 2024, reinforcing its status as a top performer. However, cautious optimism is advised for investors as the company navigates potential headwinds. With strategic adjustments, Sunu’s impressive rally could extend well into 2025 and beyond.
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