Insurance Earnings Defy Economic Pressures as Recapitalisation Reshapes Industry

Nigeria’s insurance industry delivered a mixed but largely resilient performance in the first half of the year as stronger insurers posted solid earnings despite inflation, foreign exchange losses and rising operating costs, while weaker operators raced to meet the recapitalisation deadline under the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

The financial results suggest the industry is entering a new era in which balance sheet strength, pricing discipline and investment income matter more than premium growth alone.

For investors and policyholders, the July 31 recapitalisation deadline marks a turning point that is expected to reshape competition through mergers, capital injections and a new risk-based capital regime.

Stronger insurers extend lead as earnings remain resilient

Half-year earnings show that the industry’s biggest players continued to outperform despite a difficult operating environment.

AIICO Insurance increased insurance revenue by 15 per cent to ₦74.9 billion and reported a profit after tax of ₦12.7 billion. AXA Mansard grew revenue by 19 per cent to ₦96.5 billion, while profit after tax rose to ₦7.77 billion.

Earnings per share improved from 76 kobo to 87 kobo, reflecting stronger returns to shareholders. Cornerstone Insurance also maintained momentum with an 18.5 per cent increase in revenue to ₦29 billion, while Coronation Insurance more than doubled group profit from ₦1.64 billion to ₦3.13 billion.

The picture was less encouraging for several smaller insurers. Sovereign Trust Insurance reported a 37 per cent decline in revenue to ₦21.6 billion, while Veritas Kapital recorded a six per cent fall in revenue and ended the period with a ₦1.87 billion loss.

Fortis Global Insurance posted a ₦2.6 billion loss, while Guinea Insurance reported a ₦389 million loss.

The divergence in performance reflects a widening gap between large insurers with stronger capital positions and smaller firms facing rising claims costs and tighter regulatory requirements.

The results also show differences in operating efficiency. AXA Mansard delivered an insurance service result of ₦13.2 billion, demonstrating strong underwriting discipline.

By contrast, Mutual Benefits Insurance saw its insurance service result decline from ₦7.97 billion to ₦4.64 billion as insurance service expenses grew faster than revenue.

Pricing power and investment income offset inflation and FX pressure

The H1 results indicate that earnings growth was driven less by higher policy volumes and more by pricing adjustments, improved underwriting and stronger investment returns.

Several insurers raised premiums to reflect inflation and changing risk conditions. Linkage Assurance said it repriced motor insurance policies based on customers’ risk profile and ability to pay.

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Prestige Assurance reported that although gross premium written declined by 16 per cent, insurance revenue still increased by two per cent because of improved underwriting efficiency and the impact of IFRS 17 accounting rules.

High interest rates also supported profitability by lifting investment income.

International Energy Insurance increased investment returns by 331 per cent to ₦1.13 billion, while Sovereign Trust Insurance recorded a 188 per cent increase in investment income to ₦3 billion.

These gains helped cushion pressure from rising operating costs and weak economic conditions.

However, foreign exchange losses remained a major drag on earnings.

AIICO recorded a net foreign exchange loss of ₦1.79 billion, while Cornerstone Insurance posted a ₦2.77 billion FX loss, showing that exchange rate volatility continues to affect insurers with foreign currency exposures.

The industry also began adjusting to the Nigeria Tax Act 2025, which replaced several existing levies with a consolidated four per cent Development Levy on assessable profits.

Although the reform simplifies tax administration, it also changes how insurers calculate and manage tax obligations.

Beyond earnings, balance sheets show companies preparing for tougher capital rules.

AXA Mansard maintained a healthy cash position of ₦36.1 billion, while AIICO’s cash and cash equivalents declined from ₦74.3 billion at the beginning of the year to ₦35.9 billion as capital was deployed across operations and investments.

Recapitalisation deadline set to reshape the insurance market

The biggest story behind the H1 numbers is not just profitability but the industry’s race to comply with NIIRA 2025 before the July 31, 2026 deadline.

The reform law significantly raised minimum capital requirements to ₦15 billion for non-life insurers, ₦10 billion for life insurers, and ₦25 billion for composite insurers.

It also introduced a risk-based capital framework that requires insurers to hold capital based on the risks they underwrite rather than relying solely on fixed capital thresholds.

In addition, companies must maintain statutory deposits with the Central Bank of Nigeria (CBN) equal to 10 per cent of the new minimum capital.

These reforms have triggered an industry-wide recapitalisation drive.

Fortis Global Insurance converted ₦12 billion of debt into equity and injected another ₦25 billion through zero-coupon irredeemable convertible debt to strengthen its capital base.

It also settled a ₦5 billion Daewoo bond through a debt-to-equity conversion. International Energy Insurance reclassified ₦14.1 billion in long-term debt into irredeemable deposits for shares, while Guinea Insurance recorded ₦3.5 billion in deposits for shares.

Several insurers also increased their statutory deposits with the Central Bank from previous levels of about ₦300 million to between ₦1.5 billion and ₦2.5 billion in line with the new law.

Despite these efforts, some insurers remain under pressure.

STACO Insurance remains the most vulnerable, with negative shareholders’ funds and a negative solvency margin.

Veritas Kapital and SUNU Assurances are still below the new ₦15 billion minimum capital requirement for non-life insurers, while Regency Alliance remains only slightly above the threshold, leaving little room for unexpected losses.

The next phase of reform is expected to trigger mergers and acquisitions as companies that cannot raise sufficient capital seek stronger partners.

A NAICOM board member and insurance expert described NIIRA 2025 as the beginning of “the era of renewing-to-win,” saying the reform represents the industry’s most significant transformation in decades.

According to the board member, recapitalisation is about “restoring everyone’s confidence” in the insurance market and ensuring insurers are financially strong enough to honour claims and support economic growth.

The board member said the industry is moving beyond simply meeting capital requirements to a risk-based capital regime that will allow insurers to underwrite larger and more complex risks, retain more insurance premiums within Nigeria, improve claims settlement and increase long-term investment in infrastructure.

The official also urged policyholders to verify that their insurers had complied with statutory deposit requirements, remitted the required one per cent of newly raised capital into the designated escrow account and submitted their capital status for regulatory verification before the deadline.

For investors, the H1 results suggest that the strongest insurers are well positioned to sustain earnings growth if interest rates remain supportive and foreign exchange pressures ease. For weaker operators, however, the challenge is no longer just improving profits but surviving a stricter regulatory environment.