Royal Exchange Plc, one of Nigeria's oldest insurance companies, has reported a staggering 94.2% decline in its pre-tax profit for the first half of 2026. The company's unaudited financial statements for the period ended June 30, 2026, show that pre-tax profit fell to N123 million from N2.1 billion in the corresponding period of 2025.
Revenue and Underwriting Performance
The insurer's gross premium written increased marginally by 3.7% to N18.9 billion, compared with N18.2 billion in H1 2025. However, net underwriting income dropped sharply by 27.1% to N6.8 billion, down from N9.3 billion. The underwriting loss widened to N1.3 billion from a profit of N1.1 billion, primarily driven by higher claims expenses and reinsurance costs.
Investment Income and Expenses
Investment income, a key contributor to profitability, slumped by 62.3% to N1.2 billion from N3.2 billion. The company attributed this to lower yields on fixed-income securities and reduced dividend income from associates. Operating expenses rose by 12.4% to N4.5 billion, further pressuring margins. Net claims incurred jumped by 48.6% to N7.2 billion, reflecting adverse claims experience in the motor and fire insurance lines.
Management Commentary
In a statement accompanying the results, the Group Managing Director, Mr. Chuka Nwosu, said: 'The first half of 2026 was challenging due to a combination of factors, including elevated claims inflation and a volatile interest rate environment. We are implementing strategic measures to improve underwriting discipline and optimize our investment portfolio to restore profitability in the second half of the year.'
Balance Sheet and Capital Position
Total assets rose to N92.4 billion from N88.1 billion as at December 31, 2025, driven by increases in cash and other short-term deposits. Shareholders' funds declined slightly to N18.6 billion from N19.1 billion, impacted by the drop in retained earnings. The company's solvency margin remained above the regulatory minimum, according to management.
Outlook and Analyst Views
Analysts at Lagos-based investment firm, Cordros Capital, noted that Royal Exchange's results mirror the wider challenges facing the Nigerian insurance sector, including low penetration, high claims costs, and weak investment returns. 'The 94% profit decline is alarming but not entirely unexpected given the macroeconomic headwinds. The company needs to aggressively re-underwrite its portfolio and diversify investment sources,' said analyst Adeola Adeniyi.
Royal Exchange has also announced plans to strengthen its digital distribution channels and introduce new retail products targeting the informal sector. The company expects a gradual recovery in the second half of 2026, contingent on improved claims management and stabilization of the investment climate.
Historical Context
The H1 2026 performance marks a sharp reversal from the previous year when the company had benefited from a one-off gain on sale of a property. Without that gain, underlying profitability had already been under pressure. The board has not declared an interim dividend, unlike in H1 2025 when a 5 kobo per share dividend was paid.
