With the path of earnings for insurance companies strewn with rising investment risk in 2025, actual earnings and returns may not meet expectations, turning performance negative for the risk underwriters. This is because dismal readings are sustained in their underwriting results, while investment incomes lose the spur of exchange gains for the first time in three years.
The initial high hopes for the industry breaking out of years of subdued performance into recapitalisation-driven growth highway have waned, as players are failing to follow the high-capacity building endeavours of banks for the third time since 2007.
The underwriting business stays stagnant, as insurance brokers aren’t letting in the good risks until they begin to crystalise. The hurtful industry practices that warranted the regulatory policy of ‘no premium, no cover’ continue to thrive, leaving the companies continually struggling to balance insurance revenues with costs.
The outcome is a random walk from underwriting profit to loss from year to year, leaving insurers with an unstable earnings pattern and, at best, underwriting profits unable to absorb management expenses. Apart from one or two exceptions among the listed companies, insurance companies are consistently unable to make a profit without investment earnings.
The boost in investment earnings from foreign exchange gains over the past two years gave the industry a semblance of high growth, and the dry up of the exchange gains so far this year has equally cooled off the tempo.
Further stalling the bullish tide are the poor prospects for dividend payments to shareholders that have characterised insurance companies for many years. Insurance companies usually release their earnings results late. For instance, some insurance companies have yet to release their 2024 full-year and first-quarter 2025 earnings reports even as the second quarter of the year is about to enter its last month. Traditionally, dividends are irregular or unimproved and yet, often not paid until the second half of the following year.
Apart from one or two players defying the trend, high earnings volatility marked the performance of insurance companies generally in the first quarter, with disappointing earnings raising the investment risk profile of the industry.
AIICO Insurance’s underwriting profit-to-loss random walk ended on the positive side in the first quarter. The company returned to underwriting profit of N4 billion in the first quarter after two years of underwriting losses, and the net investment result was impressive at N12.8 billion. However, the net finance expense of N9.4 billion claimed more than all the increases and after-tax profit for the quarter dropped by one-half to N4.7 billion.
Earnings per share crashed from 25 kobo to 12 kobo over the period. The company’s earnings forecast indicated that the half-year profit is expected to fall below last year’s first quarter.
Consolidated Hallmark Insurance reaped an impressive windfall from foreign exchange gains last year, but its shareholders did not share in the inflow. This year is pointing to the downside, with actual first-quarter profit significantly down from the forecast. The company’s management closed the first-quarter operations with an after-tax profit of N359 million, lower than a quarter of the corresponding figure of roughly N1.5 billion in 2024 and against a forecast profit of N657 million for the quarter.
Fair value losses on financial assets of over N2.8 billion for the quarter replaced the gains of about N1.9 billion in the same period last year. This represents an investment loss of N1.8 billion in place of over N3 billion profit in the period, which an upturn in underwriting profit could not remedy. Earnings per share are down for Consolidated Hallmark Insurance in the first quarter from 13 kobo to 3 kobo year-on-year.
Custodian Investment hasn’t healed from underwriting losses that persisted last year, as insurance and reinsurance expenses virtually consumed insurance revenue in the first quarter. Investment income keeps the hopes for profit alive for the company, with a 68.6 per cent increase year-on-year to N11.9 billion for the quarter.
Growth in operating expenses claimed most of the increase in revenue, leaving after-tax profit flat at N10.9 billion at the end of the first quarter. The company earned N1.81 per share in the first quarter, inching up from N1.80 per share in the same period last year. Despite persistently poor underwriting results, the company is one of the few in the insurance group that has managed to stand out on the strength of its fundamentals.
Guinea Insurance displayed an attitude of improvement this year but isn’t finding the strength of earnings per share to attract attention. The company increased its underwriting profit by nine times to nearly N438 million in the first quarter, and after-tax profit also advanced by 40 per cent to over N130 million. The move, however, pales into insignificance in terms of earnings per share, which came to less than 2 kobo for the quarter.
NEM Insurance stands out with its ability to generate profit from underwriting business. The company closed its first-quarter operations with an underwriting profit of N15.7 billion, improving from N12.9 billion in the same quarter last year.
Additionally, it generated a net investment result of N2 billion, and with its low management expenses, was able to build an after-tax profit of N12.8 billion for the first quarter. This represents an improvement from N10.5 billion in the same period in 2024 and better than the forecast profit of slightly over N7 billion for the first quarter.
The company earned N1.28 per share at the end of the first quarter, up from N1.05 per share in the corresponding period of last year.
Sunu Assurances recorded a sharp drop in profit in the first quarter from N2.5 billion last year to N754 million this year. Its main drawback is the loss of foreign exchange gains as huge as N1.3 billion in the same year, in place of which a net exchange loss of N39 million appeared.
The company also recorded a decline in underwriting results from over N2 billion to N1.85 billion over the period, as insurance and reinsurance expenses increased above insurance revenue. Earnings per share is down from 42 kobo to 13 kobo year-on-year.
Lasaco Assurance found strength in underwriting this year following last year’s underwriting loss. However, the strengths of investment earnings and exchange gains that produced the profit were missing in the first quarter. The drop in net investment income diluted the upturn in insurance service results.
The net fair value gain, which powered investment earnings last year, was completely missing in the first quarter, and the over N1 billion foreign exchange gains dropped to less than N62 million in the period.
The company still improved after-tax profit from N1 billion to N1.3 billion over the review period, but a major increase in share capital has led earnings per share to drop from 56 kobo to 11 kobo over the period.
Linkage Assurance managed to eke out an underwriting profit of N292 million in the first quarter out of insurance revenue of over N6 billion. That is, nevertheless, better than an underwriting loss of over N683 million in the same quarter last year.
The loss of net foreign exchange gains of over N1.7 billion in the same period last year is its restraint so far this year. That slashed investment income by 42 per cent to N1.7 billion, but the underwriting profit and a drop in insurance finance expenses enabled the company to keep its profit flat at N733 million at the end of the first quarter.
Earnings per share aren’t promising at less than 5 kobo for the first quarter, as the strength to match the earnings per share of 36 kobo at the end of last year is yet to be found.
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