Nigeria’s listed insurance companies are facing growing pressure on the Nigerian Exchange despite reporting significant increases in their profits, as investors continue to sell shares amid concerns about earnings sustainability, fresh capital requirements and cash flow performance.
The development has created an unusual situation in the insurance sector, where several major companies have recorded impressive financial results but have failed to attract corresponding interest from investors.
Among the companies affected is AIICO Insurance Plc, which reported a 27 per cent increase in nine-month profit before tax to ₦19.4 billion.
Its profit after tax also climbed to ₦17.3 billion, exceeding the ₦14.4 billion earlier projected by the company.
Despite the impressive performance, AIICO’s share price dropped by 6.6 per cent on the day the results were reported.
Other insurance companies have equally announced strong earnings growth without enjoying significant improvements in their stock market valuations.
AXA Mansard Insurance Plc recorded an 81 per cent increase in profit after tax to ₦10.9 billion, more than double its earlier projection of ₦5.1 billion.
Coronation Insurance Plc also reported a 71 per cent increase in profit, while NEM Insurance Plc generated ₦26.8 billion in earnings within nine months, surpassing its total profit for the whole of 2025.
However, their financial achievements have not been enough to convince investors to aggressively buy their shares.
Why Investors Are Selling Nigerian Insurance Stocks
Despite the strong earnings reported by several insurers, concerns about the future performance of the industry have continued to influence investor sentiment.
One major issue is the possibility of shareholder dilution following the implementation of the Nigerian Insurance Industry Reform Act 2025.
The legislation introduced higher minimum capital requirements for insurance companies, with the deadline for compliance set for July 2026.
According to the report, 43 insurance companies and reinsurers had met the regulatory requirements.
However, several companies raised additional funds by issuing new shares, increasing the number of shares in circulation.
Although such capital-raising exercises can strengthen companies financially, they can also reduce existing shareholders’ percentage ownership and earnings per share if profits do not grow sufficiently.
Coronation Insurance, for instance, increased its share capital through a ₦9.2 billion fundraising exercise, while AXA Mansard shareholders approved a rights issue of up to ₦18.3 billion.
These developments have made some investors cautious about the potential impact of additional share issuance on their investments.
Investment Income Drives Profit Growth
Another concern identified in the sector is the growing contribution of investment income to insurers’ overall profitability.
Several companies benefited from attractive returns on government bonds and treasury bills as interest rates remained relatively high.
However, investors are concerned that profits driven largely by investment returns may not be sustainable if interest rates decline.
AIICO Insurance provides an example of this situation, as investment income contributed significantly to its earnings growth while its underwriting margin reportedly declined to approximately eight per cent.
The report also identified rising reinsurance costs and foreign exchange losses as additional pressures affecting some insurance companies.
Investors generally place considerable importance on underwriting performance because it reflects how effectively insurers price risks, manage claims and generate profits from their core insurance operations.
Cash Flow Concerns Raise More Questions
Beyond profitability, the ability of insurance companies to convert reported earnings into actual cash has become another important issue.
Some insurers recorded strong profits while experiencing negative operating cash flows.
NEM Insurance Plc, for example, reported an operating cash outflow of ₦1.1 billion, compared with an inflow of ₦10.3 billion in the corresponding earlier period.
The report attributed the development partly to a significant increase in outstanding premiums owed by customers, which reportedly rose from less than ₦100 million to ₦9.5 billion.
Custodian Investment Plc also recorded negative operating cash flow, although the report noted that this could partly reflect the merchant bank now included in its consolidated financial statements.
These figures have raised questions about the quality of earnings and the ability of some insurance companies to turn accounting profits into available cash.
Insurance Stocks Trail The Nigerian Stock Market Rally
The weakness in insurance shares has become more noticeable when compared with the performance of other sectors on the Nigerian Exchange.
The Insurance Index declined by 5.52 per cent in October and was down 13.64 per cent year-to-date, making it the only major sector index in negative territory during the period covered by the report.
In contrast, the banking index gained approximately 60 per cent, while the oil and gas index advanced by 128 per cent.
The broader Nigerian Exchange All-Share Index also recorded a gain of about 60 per cent.
The performance represents a major reversal from 2025, when insurance stocks delivered approximately 66 per cent returns, outperforming the All-Share Index, which gained 51 per cent.
Several leading insurance stocks have also recorded losses.
AXA Mansard declined from ₦13.70 at the beginning of the year to approximately ₦11.65 in early November, representing a fall of about 15 per cent.
Coronation Insurance dropped from ₦3.25 to approximately ₦2.22, while Cornerstone Insurance declined by about 24 per cent year-to-date.
AIICO Insurance also recorded a decline of approximately six per cent.
Custodian And Other Stocks Record Different Performances
Despite the broader weakness, some insurance-related companies have recorded positive share price performances.
Custodian Investment Plc has gained approximately 50 per cent this year, trading around ₦65, although the stock has retreated from its April level of about ₦87.
The company also reported a 26 per cent increase in nine-month profit before tax.
Fortis Global Insurance Plc recorded an even more dramatic share price increase of approximately 805 per cent during the first nine months on an unadjusted basis.
However, after accounting for its one-for-four share reconstruction, the gain reduced to approximately 126 per cent.
Despite
