NEM profit rises 31% as operating cash flow turns negative

NEM Insurance increased nine-month profit by about 31%, but cash generated by its operations turned negative, creating a gap between reported earnings and the money available from underwriting activity. Its unaudited accounts, approved on 28 October, put profit after tax at N26.77 billion, against N20.51 billion a year earlier.

The central issue for shareholders is the composition of that improvement. An insurer can strengthen earnings through both insurance operations and investment returns; those gains do not necessarily arrive as cash at the same time as claims become payable.

Underwriting improvement needs a cash-flow comparison

In its NGX financial statement , NEM reported insurance revenue of N115.69 billion and an insurance service result of N20.81 billion. Operating cash flow, however, was an outflow of N1.06 billion, compared with an inflow of N10.35 billion.

That divergence matters because insurance revenue measures services recognised during the reporting period, while operating cash flow records actual receipts and payments. Growth in recognised business cannot be treated as proof that immediately available liquidity improved. Equally, one negative interim cash-flow figure does not by itself establish that an insurer cannot meet claims.

The more useful question is whether the cash shortfall reflects temporary settlement timing, slower collection or a persistent change in the cost of servicing business. Those possibilities have different consequences for investment income, future premium pricing and the resources available for distributions.

Claims payments change the liquidity picture

The cash-flow statement shows direct claims paid of N39.43 billion, up from N30.54 billion, while premium receipts fell to N112.54 billion from N122.23 billion. Cash and cash equivalents ended September at N12.25 billion, against N27.61 billion at December 2025.

Claims settlement is a core obligation rather than an exceptional expense to be removed from an assessment of an insurer. A faster pace of payment may benefit policyholders, but it also requires readily accessible assets. The timing of recoveries from reinsurers can further separate the recognition of a claim from its ultimate cash cost.

For commercial policyholders, this makes settlement capacity a more relevant question than earnings growth alone. For investors, the distinction is between profitable risk selection and the funding needed to honour those risks. Neither assessment can be completed solely from a headline profit figure.

Market gains add another source of earnings sensitivity

NEM recorded N12.70 billion of net fair-value gains and N9.47 billion of interest revenue, alongside a N3.61 billion foreign-exchange loss. The accounts therefore show investment performance contributing materially to the overall result.

A fair-value gain records a change in an investment's measured value; it does not necessarily mean that the asset has been sold. Such gains can support net assets while leaving current cash largely unaffected. Subsequent market movements can also alter the value before disposal.

Interest earnings have a different economic character, but their durability still depends on the instruments held, maturity dates and reinvestment opportunities. It would be misleading to assume that every component of investment income will recur at the same level or that the portfolio can be converted to cash without trade-offs.

A larger equity base does not settle the dividend question

Reported equity reached N103.26 billion, compared with N84.01 billion at year-end. That is a balance-sheet measure, not a regulatory solvency certification or an announcement of a new dividend.

Capital and liquidity answer related but separate questions. Capital provides a buffer against losses; liquidity concerns the ability to make payments when due. An expanding capital base can coexist with a weaker interim cash balance, particularly where assets include investments and receivables.

The implication is that shareholders should assess distribution capacity against claims obligations, asset availability and applicable approvals. A simple profit-based payout assumption would overlook the cash-flow tension visible in these accounts.

The next assessment turns on collections and settlement timing

The figures cover nine months to September, although they were approved in late October. They are not a full-year outcome and do not establish what happened to cash balances after the reporting date.

Subsequent reporting will be more informative if operating receipts recover alongside earnings and if claims payments remain supported by accessible investments. Until then, NEM's result supports a finding of higher reported profitability, accompanied by a clear reason to examine cash conversion before drawing conclusions about the strength of the improvement.