GCR upgrades NEM Insurance national scale financial strength rating to AA+(NG) on sustained profitable growth; outlook stable

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Chuks Udo Okonta

GCR Ratings (GCR) has upgraded NEM Insurance Plc’s national scale financial strength rating to AA+(NG) from AA(NG), with the outlook maintained as Stable.

The renowned agency said the rating upgrade reflects the sustained strengthening in NEM Insurance Plc’s (NEM or the insurer) competitive position within the non-life insurance segment, supported by a sound financial profile that is characterised by robust risk-adjusted capitalisation, adequate liquidity and good earnings capacity.

It maintained that NEM remains a leading insurer within the Nigerian non-life insurance segment, accounting for an estimated market share of 10 per cent in 2024. NEM’s insurance revenue grew by 88.0 per cent to N98.0 billion (USD63.1 million) in 2024, underpinned by its strong brand franchise, established track record and well-entrenched relationship with brokers.

Additionally, it said the firm’s revenue base is well diversified, with four of the eight lines of business each contributing over 10 per cent of insurance revenue. Looking ahead, the insurer is expected to strengthen and maintain its leading position in the non-life insurance space while the planned expansion to the life business could further support business diversification over the outlook horizon.

NEM maintained a sound earnings profile over the review period, supported by sustained growth in insurance revenue, profitable underwriting and strong investment income. In this respect, the net incurred loss ratio improved to 28.5 per cent 2023: 33.6 per cent) reflecting benefits of scale efficiencies, translating to a normalisation of the combined ratio to 86.6 per cent in 2024 (2023: 100.5 per cent; 2022: 88.8 per cent) and compares favourably with peers, GCR posited.

It noted that the investment yield remained strong at 18.9 per cent, supported by a high investment portfolio allocation to fixed income securities amid the high-interest rate environment.

It submitted that consequently, profit after tax improved considerably by 125.8 per cent to NGN29.9 billion (USD19.3 million), resulting in a robust return on revenue of 43.1 per cent in 2024 (2023: 35.7 per cent.)

The insurer’s ability to maintain a strong earnings profile while sustaining competitive gross premium growth and diversifying into longer term lines that pose significant expense strain represents a key rating input over the medium term, it said.

Risk-adjusted capitalisation remains the major rating strength, according to the agency, stating that underpinned by a sizeable capital base relative to aggregate risk exposures. As a result, the GCR capital adequacy ratio (CAR) improved to 2.4x as of 31 December 2024 (31 December 2023: 2.1x), reflecting good loss absorption capacity.

Additionally, NEM’s statutory solvency margin remained strong at 19.3x (31 December 2023: 8.8x), well above the regulatory minimum of 1x. Looking ahead, we expect the GCR CAR to be sustained within a 1.7x to 2.0x range over the next 12-18 months, balancing the expected business expansion and good earnings retention, it submitted.

According to the agency, the liquidity assessment is positive to the rating. NEM’s sound liquidity coverage of 1.8x as of 31 December 2024 (31 December 2023: 1.7x) reflects sizeable investments held in highly liquid securities and term deposits, which accounted for 47.6 per cent of the investment portfolio, adding that over the next 12-18 months, we expect liquidity coverage to be sustained above 1.5x, barring liquidity strains from the insurer’s business expansion plans.

GCR Ratings stated that the Stable Outlook reflects its expectation that NEM will sustain its market position supported by business expansion and diversification in line with strategy. “We also expect risk-adjusted capitalisation and liquidity ratios to be maintained above 1.7x and 1.5x respectively over the next 12-18 months, while earnings strengths could moderate due to expense strain from onboarding longer term products,” it posited.

On rating triggers, the agency submitted that an upward rating movement could result from sustained earnings strength that improves capitalisation and liquidity metrics to above 2x despite the planned business expansion, accompanied by solid capital management strategies.

The Managing Director NEM Insurance Plc Andrew Ikekhua, said the upgrade confirms the firm’s strategic underwriting process and sustained profitability, stressing that the company would continue to offer robust insurance services to policyholders in line with its core values and vision which is to be the provider of choice for healthy insurance solutions.

The outstanding performance of NEM Insurance Plc, has continued to gain recognition as its Managing Director Andrew Ikekhua, was recently recognised among the Top 25:Chief Executive Officers (CEOs) in Nigeria.

He was rated as one of Nigeria’s outstanding corporate leaders at the prestigious BusinessDay Top 25 CEOs Awards held in Lagos.

The underwriter, one of the top insurance companies in Nigeria, emerged as the ‘General Insurance Company of the Year’ at the 2025 Almond Insurance Industry Awards. The company won the category among other nominees, a significant recognition of excellence within Nigeria’s insurance sector.

NEM Insurance Plc also emerged winner of the Sectoral Leadership Award – Financial Services Insurance category, at the prestigious 2025 Pearl Awards.