Insurers’ Stock Rally Ignores Headwinds from Mounting Operating Costs

Investors have turned a blind eye to rising operating costs that are squeezing insurers whose profit slumped even amid regulatory hurdles as the sector braces for new reforms needed to place it on a global competitive arena.

Data gathered by MoneyCentral shows the eleven (11) most liquid and capitalised insurers listed on the NGX collectively posted profit after tax (PAT) of N80.92 billion in the first six months of 2025, which is 34.01 percent lower than 2024’s N112.63 billion.

They collectively incurred N514.02 billion total operating expenses (Insurance expenses, reinsurance expenses, and management expenses) as at June 2025, which represents a 65.86 percent increase from 2024’s N338.54 billion.

Insurance stocks are the best performers on the Nigerian Exchange or NGX, with the NGX Insurance Index up 125% year-to-date, compared to a 42% gain in the broader market.

Insurance stocks are rallying amid a push for recapitalisation of the sector which could see new mergers or acquisitions. Investors are taking positions ahead of any such deals materialising.

Rising expenses have prevented impressive topline performance by Insurers from translating into bottom line (sales) growth, which means sector players are struggling with deteriorating underwriting margin.

These eleven insurers who benefitted from favourable pricing and increased patronage saw their combined revenue spike by 38.63 percent to N553.64 billion in the first six months of 2025.

As a result of a challenging environment, sector players have paid more in claims than the premium that they received, while the combined ratio has exceeded the 100 percent benchmark.

Analysts say rising costs caused by inflationary pressures as well as foreign currency volatility have contributed in making the replacement costs of assets expensive as some insurable assets were indemnified when the exchange rate was benign.

The naira has depreciated against the US dollar by 69.47 percent under the current administration led by President Bola Ahmed Tinubu amid the implementation of foreign exchange reforms which caused disruption to the economy and exacerbated inflationary pressures.

“One of the reinsurance companies had issues with the regulator and couldn’t operate this year. This reduced the competition in the market, and we have to agree with any rate from the available reinsurer,” said an actuarial scientist who did not want his name mentioned.

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