Insurance Sector: Investment income, not core insurance operations, drives H1 2026 profits

Investment returns emerged as a major profit driver for listed Nigerian insurers in the first half of 2026, with earnings from investment activities surpassing profits generated from their core insurance operations.

An analysis of the H1 2026 financial statements of 17 listed operating insurers shows that they generated a combined N79.22 billion in investment results, compared with N66.22 billion in insurance service results.

This means investment returns exceeded core insurance profits by about N13 billion, or nearly 20%.

The trend was also broad-based; 10 insurers recorded higher investment results than insurance service results

Custodian Investment, Consolidated Hallmark Holdings, and Royal Exchange were analyzed individually rather than included in the 17 companies.

Their group results combine insurance operations with other businesses and investment activities, making them less directly comparable with standalone insurers when assessing how much profit comes from insurance versus investments.

However, the lower insurance service results do not necessarily mean insurers generated weak insurance revenue.

Several insurers recorded strong insurance revenue in H1 2026, but a significant portion was absorbed by insurance service expenses and, in some cases, reinsurance costs, reducing what eventually translated into insurance service profit.

This distinction is important because it shows that the issue is not simply how much premium-related revenue insurers generate, but how efficiently they convert that revenue into profit after claims, insurance expenses and reinsurance costs.

For example, Mutual Benefits generated N42.25 billion in insurance revenue, but N40.87 billion; almost 97% of that revenue was absorbed by insurance service expenses. Its eventual N4.64 billion insurance service result was helped by positive reinsurance income.

Insurers where investment income exceeded insurance service results

AIICO Insurance reported investment income of N27.61 billion, more than three times its N8.13 billion insurance service result.

The strong investment performance helped the insurer deliver N15.05 billion profit before tax and N13.40 billion profit after tax in H1 2026.

• AIICO has also met the recapitalization requirement, with net assets of N109.15 billion as of June 2026, which is about 16% of total assets.
• Mutual Benefits also generated more from investments than its core insurance operation. Investment results stood at N7.36 billion, compared with an insurance service result of N4.64 billion.

The company subsequently recorded PBT of N10.35 billion and PAT of N9.75 billion.

Linkage, Sovereign Trust lean heavily on investments

The dependence on investment earnings was more pronounced at some smaller insurers.

• Linkage Assurance recorded only N45.27 million in insurance service profit, compared with N6.42 billion from investments. Investment returns therefore accounted for the bulk of the earnings support that helped the insurer report N3.11 billion PAT.
• Sovereign Trust Insurance generated N3.02 billion from investments, nearly three times its N1.09 billion insurance service result. PAT stood at N741.25 million.
• Prestige Assurance also recorded a slightly higher investment result of N1.25 billion, compared with its N1.09 billion insurance service result.
• Regency Alliance generated N1.33 billion from investments against N905.58 million from insurance services.
• International Energy Insurance provides an even sharper example. Its insurance service result was just N55.36 million, while net investment income reached N1.10 billion.

The investment performance helped keep IEI profitable despite weakness in its insurance business. The insurer reported H1 PAT of N159.98 million.

Custodian, Consolidated Hallmark made the trend even clearer

The investment-heavy nature of industry earnings becomes even more pronounced when the listed insurance holding companies are considered separately.

• Custodian Investment recorded about N73.10 billion in investment-related results, compared with an insurance service result of N7.39 billion, while Consolidated Hallmark Holdings generated N27.33 billion from investments against N2.61 billion from insurance services.
• Consolidated Hallmark’s H1 PAT of N25.28 billion was particularly boosted by investment returns, making the sustainability of those gains an important factor for future earnings.

Insurers where insurance service results exceeded investment income

NEM Insurance reported investment result of N12.01 billion, although unlike AIICO, its core insurance operation remained the larger earnings contributor.

• NEM generated an N15.59 billion insurance service result, the highest among the insurers reviewed, helping lift PBT to N20.96 billion and PAT to N18.09 billion.

This suggests that NEM’s H1 earnings were more balanced between its insurance business and investment portfolio.

Its net assets of N94.570 billion accounted for about 49% of the insurer’s total assets.

• AXA Mansard generated an N13.21 billion insurance service result, nearly three times its N4.71 billion investment result. The company recorded PAT of N7.77 billion.
• Cornerstone Insurance also generated considerably more from insurance operations, with an N8.87 billion insurance service result compared with N2.94 billion from investments.
• Coronation Insurance recorded N6.06 billion from insurance services against N4.03 billion from investments, while Universal Insurance generated N4.09 billion from its insurance business, compared with N2.49 billion from investments.

LASACO and Sunu assurance also recorded stronger insurance service results than investment results.

These companies provide evidence that insurers can still generate meaningful profits primarily from their core business rather than relying heavily on investment returns.

Where investment income could not rescue every insurer

Strong investment income also did not automatically translate into profits.

• Veritas Kapital generated N1.78 billion from investments, but its insurance service result was a N687.30 million loss. Higher expenses eventually pushed the insurer to a N1.87 billion loss after tax.
• Fortis Global similarly recorded an N2.38 billion insurance service loss. Despite recording positive investment and financial income, the insurer finished H1 2026 with a N2.60 billion loss after tax.
• Guinea Insurance generated N434.65 million in investment results compared with just N39.11 million from insurance services but still recorded a N389.12 million loss after tax.

The results show that investment income can support earnings, but it cannot indefinitely compensate for weak insurance operations and high operating costs.

Investor perspective

Nigeria’s insurance recapitalisation has significantly strengthened the sector’s capital base. The industry has raised about N720 billion, with 48 insurance companies and two reinsurance firms verified by NAICOM as having met the new requirements.

• However, six insurers missed the July 31, 2026, deadline: Goldlink Insurance, Staco Insurance, NICON Insurance, Nigeria Reinsurance Corporation, Royal Exchange Prudential Life and Universal Insurance.
• For compliant insurers, the larger capital base provides greater capacity to write more business, absorb risks and deploy funds into interest-bearing securities and other investments.
• But recapitalisation does not remove all the risks in the sector. H1 2026 results highlighted another important issue: where profits are coming from.

With interest rates still attractive, insurers with large investment portfolios have benefited significantly from fixed-income securities and other investments. In some cases, investment income has become a major driver of profit.

There is nothing wrong with insurers earning strong investment returns. The concern is whether those earnings can be sustained if interest rates fall or market conditions change.

That is why investors should look beyond headline profit numbers. A stronger insurance business should also be able to generate consistent earnings from premiums, underwriting, and claims management.

Going into H2 2026, the investment case is therefore shifting from who has successfully recapitalised to who can put that capital to productive use.

The companies likely to create the most shareholder value will be those that can grow insurance revenue, improve underwriting profitability, and generate sustainable earnings, while still earning reasonable returns from their investment portfolios.

The key question is therefore simple: not just how much profit is an insurer making, but where is that profit coming from, and can it be repeated?