Nigerian insurance stocks have been among the hottest plays on the Nigerian Exchange (NGX) in 2025.
The NGX Insurance Index has surged 82% year-to-date, making it the second-best performing index, only behind the Consumer Goods Index at 90.36%.
This rally reflects renewed investor confidence in the sector, likely driven by the recapitalization agenda, rising premiums, and improving profitability.
Recently, the Nigerian Senate approved a revised capital base for insurance companies, setting new benchmarks for operators:
- N25 billion for non-life insurance
- N15 billion for life insurance
- N35 billion for reinsurance firms
By strengthening the sector’s foundation, reducing systemic risk, and boosting investor trust, it gives investors reason to bet that it will be stronger.
Well-capitalized firms will not only survive but thrive, helping to make insurance one of the best-performing sectors on the NGX in 2025.
Currently, about 21 insurance companies are listed on the NGX with a low share price, which is an attraction. On average, the listed insurers trade at around N4.57 per share, making them affordable, especially to retail investors.
However, like individuals, these insurers are not all equal in size, performance, or market influence.
More so, with more than 15 of them delivering double-digit returns so far in 2025 well above the inflation rate, choosing the best becomes tricky.
How do they make their money?
- Premiums (Core underwriting income): The bulk of revenue comes from premiums paid by policyholders. This includes life, non-life (general), and health insurance.
- Investment income: Insurers invest collected premiums into assets such as government securities, equities, bonds, and real estate. Returns on these investments often provide a steady stream of income and can sometimes rival or exceed underwriting profits.
- Reinsurance arrangements: By transferring part of their risk exposure to reinsurance firms, insurers manage large claims more effectively. Though reinsurance reduces net income, it protects solvency and allows companies to underwrite bigger policies.
- Fee-based income and other services: Some insurers diversify into pensions, HMOs, and asset management. These subsidiaries generate fee-based income, similar to how banks benefit from non-banking subsidiaries.
Where and how to buy
Investors can buy insurance stocks directly on the NGX through licensed stockbrokers or online/mobile trading platforms.
That said, generally, when investing, consider insurers with:
- Strong asset base, revenue, and profit growth
- Dividend consistency and reliable cash flows
- Efficiency ratios such as claims ratio, ROE, solvency ratio, and capital adequacy ratio
- Valuation ratios such as P/E and P/B, compared to sector averages
- Trading liquidity, to ensure ease of entry and exit
Size and market strength
As of H1 2025, Nigerian listed insurance companies collectively controlled assets worth about N1.7 trillion.
The asset base matters because:
- A larger asset base allows insurers to take on bigger policies and settle claims without straining liquidity.
- Insurance companies invest their assets in bonds, equities, and other instruments. A larger pool can generate higher potential investment returns, boosting profits.
- In a recapitalization environment, insurers with large asset bases are better positioned to meet regulatory thresholds and weather financial shocks.
In context, AIICO, AXA Mansard, Mutual Benefits, NEM Insurance, Cornerstone, and Coronation Insurance dominate with asset bases above N100 billion.
This strength is also reflected in market capitalization, where these same companies lead. By the end of August 2025, the 21 listed insurers had a combined market cap of N1.002 trillion, an increase of over N480 billion higher than the year-end 2024.
Risks:
When buying insurance stocks, investors must also weigh the risk.
For insurers, the biggest risk is underwriting risk: the possibility that claims exceed premiums collected. This is tracked through ratios.
- Claims Ratio (Loss Ratio): Claims paid relative to premiums earned. Lower is better.
Takeaway – Insurers with lower claims ratios and other risk ratios are better positioned to withstand shocks and protect shareholder value.
Profitability and growth
Profitability is at the core of why investors buy stocks. Profits drive dividend payments, which remain a key attraction in Nigeria.
In the last five years, the 21 listed insurers collectively delivered about N289 billion in profit after tax, with NEM Insurance, AXA Mansard, Cornerstone, AIICO, and Consolidated Hallmark leading the pack.
- In 2024, NEM Insurance reported the highest profit after tax, though not the fastest growth rate.
- Over five years, Consolidated Hallmark recorded the highest CAGR of 101%.
Beyond paper profits, investors should examine cash flow from operations, which reflects capacity to sustain dividends and expansion.
- On this front, Consolidated Hallmark leads with the highest accumulated operating cash flow.
Takeaway – Look for consistency. Insurers with steady profits and robust cash flows are better positioned for growth and shareholder rewards.
Efficiency matters
Beyond profit size, efficiency in capital deployment is critical.
- Return on Equity (ROE): Shows how effectively an insurer generates profit from shareholders’ funds.
- On a TTM basis, African Alliance Insurance and NEM posted the highest ROEs.
Valuation: cheap or expensive?
Before buying insurance stocks, investors must assess valuation. Key ratios include:
- Price-to-Earnings (P/E): What investors pay for each N1 of earnings. A high ratio indicates premium pricing, often justified by strong growth, while a lower P/E indicates potential undervaluation or weaker fundamentals.
- Price-to-Book (P/B): Share price vs. net assets per share is crucial in insurance, as assets underpin underwriting strength.
Final thought
The insurance sector remains a vital part of the Nigerian market. Its history of dividend payouts and relatively low share prices make it attractive to both income-seeking and retail investors.
Still, risks abound. Insurers are tightly regulated by NAICOM, and policy changes, whether in recapitalization, asset valuation, or claims obligations can swiftly impact profitability.
- For stronger balance sheets and dividend stability, look to larger insurers such as NEM, AXA Mansard, and AIICO.
- For higher risk–reward potential, smaller players such as Universal Insurance or Consolidated Hallmark may appeal—but they require scrutiny.
Overall, with a combined market capitalization of about N1 trillion against N1.7 trillion in total assets and N603 billion in net assets, investors are valuing Nigerian insurers at roughly 1.6x book value.
This, signals growing confidence in the sector’s ability to turn its asset base into sustainable profit and are no longer treating insurance stocks as “cheap laggards” but as income and growth plays with stronger balance sheets and improving profitability.
Still, the gap between market cap and total assets shows that much of the sector’s potential remains tied to how efficiently these companies deploy their capital, manage risks, and scale operations.
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