Nigerian insurers have delivered one of the strongest earnings seasons on the local exchange, yet their shares are among the cheapest in the market. That contradiction sits at the heart of a puzzle facing investors in Africa’s largest listed insurance sector.
Profits Beat Forecasts Across the Board
AIICO Insurance Plc reported a 27% jump in nine-month pre-tax profit to N19.4 billion, with profit after tax of N17.3 billion surpassing the N14.4 billion the insurer had forecast to the exchange earlier in the year.
AIICO was not alone. AXA Mansard Insurance Plc lifted profit after tax by 81% to N10.9 billion, more than double its own forecast of N5.1 billion. Coronation Insurance Plc posted a 71% rise, while NEM Insurance Plc earned N26.8 billion in nine months, more than its total for 2025. Five of the six largest listed underwriters grew profit by between a quarter and four-fifths.
Share prices, however, tell a different story. AXA Mansard opened the year at N13.70 and traded around N11.65 in early November, roughly 15% lower and well below its 52-week high of N18.70. Coronation has fallen about a third, from N3.25 to about N2.22. Cornerstone Insurance Plc is down about 24% year to date, and AIICO about 6%.
A Sector Left Behind by the Market Rally
The Insurance Index fell 5.52% in October and is down 13.64% year to date, the only major sector index in negative territory. Over the same period, the banking index gained 60%, the oil-and-gas index 128%, and the All-Share Index 60%.
That marks a sharp reversal for a sector that beat the broader market in 2025, when insurance stocks returned about 66% against 51% for the All-Share Index.
The result is unusually low valuations. Annualising nine-month earnings, AIICO trades at about 5.6 times profit, Custodian Investment Plc at about 5.9 times, and AXA Mansard at about 7.2 times. NEM, the most profitable of the group, trades at about 7.9 times. Coronation and Cornerstone are valued at roughly the book value of their equity, and AIICO at only slightly more. Those multiples imply earnings yields well into double digits, for companies whose annualised returns on equity range from about 13% at Cornerstone to nearly 38% at NEM.
Three Concerns Weighing on Sentiment
The first concern is dilution. Under the Nigerian Insurance Industry Reform Act 2025, insurers had until July 2026 to raise capital to new minimum levels. Many met the requirement by issuing shares, and the regulator says 43 insurers and reinsurers complied.
The second is the quality of earnings. Much of this year’s profit growth came from investment portfolios rather than underwriting, as insurers with large fixed-income books captured persistently high bond and treasury-bill yields.
The third is cash. Several insurers reported profits that did not convert into cash. NEM’s operating cash flow swung to an outflow of N1.1 billion from an inflow of N10.3 billion, as premiums still owed by its customers rose from under N100 million to N9.5 billion. Custodian’s operating cash flow also turned negative, although that probably reflects the merchant bank it now consolidates.
Exceptions and Anomalies
The sell-off has not been uniform. Custodian’s shares are up about 50% this year at around N65, though they have pulled back from about N87 in April despite a 26% rise in nine-month pre-tax profit.
Some of the sector’s most dramatic gains have come from its weakest companies. Fortis Global Insurance Plc rose 805% in the first nine months on a headline basis; adjusted for its 1-for-4 share reconstruction, the gain shrinks to 126%, and the company is still loss-making. Guinea Insurance Plc’s shares rose 43% in October after its capital raise, despite a first-half loss. For investors, those moves suggest share prices are saying little about which insurers are actually performing.
Dividends as the Clearest Test
Dividends may offer the sharpest signal. Cornerstone’s last payout of 28 kobo gives a yield of about 6% at current prices, the highest among the large insurers, while Custodian yields about 4%. Coronation, which has not paid a dividend, has told shareholders it hopes to resume payouts within a year, while AXA Mansard paid none in 2026.
If full-year results due early next year show profits holding up on the enlarged share bases, the valuation gap could narrow. The key evidence would be dividends paid on the larger share counts and receivables turning into cash.
Until then, the market appears to be treating the recapitalised insurance sector with suspicion. Stronger capital and higher profits have given investors a better industry. They have not yet given them a reason to pay more for its shares.
