Oil, motor businesses drive NEM’s N19.8bn profit outlook

NEM Insurance Plc projects a profit after tax of N19.8 billion for the second quarter ending June 30, 2026, supported largely by premium income from its oil and gas, motor, and fire insurance businesses.

The company projects insurance revenue of N102.47 billion for the period, underscoring the scale of underwriting activity across its core non-life portfolios.

Oil and gas insurance is projected to account for the largest share of revenue, bringing in about N28.04 billion. Motor insurance follows with N27.26 billion, while fire insurance is expected to contribute N18.15 billion.

Together, the three segments account for a large portion of the company’s projected premiums and remain central to its underwriting strategy.

While revenue is expected to remain strong, the forecast also reflects the high cost of underwriting large commercial risks.

Insurance service expenses are projected at N62.77 billion during the quarter, covering claims payments and other costs associated with servicing insurance contracts.

The company also expects net expenses from reinsurance contracts to reach N17.15 billion. Reinsurance allows insurers to transfer part of their risk to other insurers, particularly in sectors such as oil and gas, where potential claims can be significant.

After accounting for these costs, NEM is projecting an insurance service result of N22.55 billion.

Read also: Nigeria’s insurance premiums hit record N1.98trn

Claims remain a key cost driver within the business.

In the oil and gas segment, incurred claims are expected to reach N10.37 billion during the quarter. The motor insurance business is projected to record claims of N8.62 billion.

These figures underline the risk profiles of both portfolios, which typically carry high policy volumes and exposure to costly claims.

Beyond underwriting, investment income is expected to support earnings during the period.

Interest income is projected at N4.66 billion, while dividend income from equity investments is expected to contribute approximately N839.65 million.

The company is also forecasting fair value gains of N1.86 billion on financial assets.

However, the forecast reflects possible pressure from exchange rate movements, with a projected foreign exchange loss of N591.6 million.

Operating costs are another factor shaping the earnings outlook.

Other operating expenses are expected to reach N7.29 billion, while provisions for credit losses and finance costs will also weigh on the company’s bottom line.

After accounting for these costs, NEM is projecting a profit before tax of N22.24 billion.

Income tax obligations are expected to amount to N2.45 billion, leaving a forecast profit after tax of N19.8 billion for the quarter.

The company’s balance sheet projections show continued growth in assets as it expands its investment base.

Total assets are expected to reach N183.14 billion by the end of the second quarter.

Financial assets measured at amortised cost account for the largest portion of the portfolio at N83.13 billion. These typically include fixed-income securities such as government and corporate bonds.

Financial assets measured at fair value through profit or loss are projected at N21.97 billion, while those measured through other comprehensive income are estimated at N3.80 billion.

Liquidity remains strong. Cash and cash equivalents are projected to reach N23.63 billion, providing the company with resources to meet claims obligations and support underwriting operations.

Reinsurance contract assets are expected to stand at N25.43 billion, representing recoveries from reinsurers for risks shared.

Other receivables and prepayments are projected at N11.36 billion, while property, plant, and equipment are expected to reach N5.58 billion.

The company is also expanding its real estate presence as part of its investment strategy.

A completed building has been reclassified as an investment property valued at N3.95 billion and is expected to generate rental income.

Investments in subsidiaries, including NEM Health and NEM Asset Management, are projected at N684.38 million.

On the liabilities side, total obligations are expected to reach N86.92 billion.

Insurance contract liabilities account for the largest share at N63.42 billion, reflecting outstanding claims and unearned premiums that must be settled in the future.

Other insurance-related liabilities are projected at N3.30 billion, and other payables at N5.33 billion.

Income tax liabilities are expected to reach N9.94 billion, while deferred tax liabilities are projected at N4.57 billion.

Lease liabilities are estimated at N359.83 million.

Shareholders’ equity is forecast to reach N96.22 billion, providing a strong capital base for the insurer.

Retained earnings make up the largest portion of equity at N63.75 billion, while statutory contingency reserves stand at N24.68 billion.

Share capital is projected at N5.02 billion, while asset revaluation reserves are estimated at N2.79 billion.

Overall, the forecast suggests NEM is entering the second quarter of 2026 with strong underwriting activity, a large investment portfolio, and a sizeable capital buffer, while highlighting the balance insurers must maintain between generating premium income, managing claims exposure, and building investment assets to sustain profitability.